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Monday, October 11, 2010

Fed's Yellen: Low rates can fuel bubbles

In an effort to stimulate the economy, the Federal Reserve has held interest rates unchanged between 0% and 0.25% since December 2008.
As the economic recovery has shown signs of weakness this year, the Fed has adamantly stuck to that policy, with all but one member of the Fed's policymaking committee voting in favor of keeping rates "exceptionally low" for an "extended period"
Yes, I think the housing market with addition of the affordability products are key example of the bubble.  If mortgages go back to the historical 8% to 10% range can you honesty expect prices not to drop again.

On a side note, the Fed will meet in November 3rd and they are looking for ways to push interest rates even lower.  And some experts are worried that we are creating a new inflation bubble.

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