Tags: Ron Insana | Federal Reserve | housing | easing

Ron Insana: Fed's Worry About Housing Weakness May Spark Further Easing

By    |   Tuesday, 13 May 2014 09:42 AM

Federal Reserve Chair Janet Yellen expressed concern about the housing market's sluggishness last week, indicating the Fed may implement additional easing, says Ron Insana, a CNBC contributor.

"Readings on housing activity — a sector that has been recovering since 2011 — have remained disappointing so far this year and will bear watching," Yellen said in her prepared remarks to Congress. New home sales plunged 14.5 percent in March.

So how might the Fed increase its easing?

Editor's Note:
New Warning — Stocks on Verge of Major Collapse


"It could 'taper the taper,' taking a couple months off [from reductions in its bond purchases] and then re-start the taper if real estate picks up, or stop for a protracted period," Insana writes in a commentary for CNBC.

Or the central bank might stop paying banks 0.25 percent interest for deposits held at the Fed to push banks to make loans.

"Since banks would be earning zero on their deposits at the Fed, their incentives to lend could change quickly, particularly if the Fed were to adopt a negative deposit-rate policy," Insana predicts.

Finally, regulators could relax credit standards to make things easier for homebuyers, he says.

"I am betting that the Fed has a few more tricks up its sleeve to take a more targeted approach to getting the economy to fire on all cylinders," Insana notes.

"If it doesn't 'taper the taper,' I still expect the Fed will continue unconventional efforts to get the economy, and more specifically, real estate, rising again."

Meanwhile, Peter Dreier, a politics professor at Occidental College, says the housing rebound of the past two years isn't all it's been cracked up to be. Indeed, it has skipped much of the nation, he writes in The New York Times.

"Frequent reports about rising prices suggest that the tens of millions of people whose homes lost value just have to wait until the recovery reaches their neighborhood to lift them out of crisis. But this supposed housing recovery is bypassing many of our cities and towns."

Editor's Note: New Warning — Stocks on Verge of Major Collapse

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Federal Reserve Chair Janet Yellen expressed concern about the housing market's sluggishness last week, indicating the Fed may implement additional easing, says Ron Insana, a CNBC contributor.
Ron Insana, Federal Reserve, housing, easing
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2014-42-13
Tuesday, 13 May 2014 09:42 AM
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