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FOMC Alienates The One More Time Crowd

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-3/4 percent.

Why?

…possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures. Press Release [1]

There were no real surprises today [NYT] [2] so the Greenspan era lives on.

Fed economists have argued that a slowing housing market is likely to dampen overall economic growth. Housing, however, is not sinking yet. Sales of existing homes rose in February, housing starts remain strong and by some measures home prices are still rising.

While it is true that housing is strong in many markets, there are many markets not rising any more. Because the connection between housing and the economy is connected by the consumer, the economy may unravel faster than the Fed can react to.

It looks like at least one more increase is in store for us, perhaps more.