No Fed housing rescue today

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Fed headline: No change in interest rates, Fed remains most concerned about inflation, which means it remains more likely to raise rates than to cut rates. This disappoints those (Jim Cramer) who believe the housing/debt crisis is so severe the Fed needs to move off its ‘tightening bias,’ and start leaning toward cutting rates.

That said, the Fed today did pay more lip service to the housing and debt problems than it has in the past: From today’s Fed statement: ‘Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing.’

From the previous Fed statement (June 28): ‘Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector.’

Important distinction: The Fed now says housing is in a ‘correction,’ not an ‘adjustment.’ Traders and investors generally use the word ‘correction’ to describe a significant decline. The Fed knows this.

Market reaction: The Dow, at 2:36 pm EDT (21 minutes after the Fed’s statement was released), was down 105 points. It had been up 35 points prior to the decision. The Fed is not coming to the rescue; investors are disappointed.

What else did the Fed say? You can click on the links and read the entire statements, but what we’ve quoted above is the entirety of what the Fed said about housing and credit.

Comments? Thoughts? Insights?
Photo Credit: Reuters