There was speculation that the Federal Reserve might actually lower the interest rates to keep the real estate market from declining further. Economic conditions such as gas prices, unemployment, inflation and the real estate foreclosure market are all factors being considered. I think it was necessary to raise the rates to stop the home price increase enjoyed by so many for the past sveral years. I imagine the fed pushed the rate to the top to watch the effect and then will back it off a notch soon. The market is usually very good during the spring and summer and this year is no different. I think that if the fed pulls back a little, it will be in the slow time of year - possibly August but more than likely at the end of the year.
Release Date: May 9, 2007
For immediate release
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to expand at a moderate pace over coming quarters.
Core inflation remains somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.