Tuesday, December 12, 2006

What’s In a Word

The most significant result of today’s FOMC meeting was the simple insertion of the single word “substantial” in their statement regarding the housing decline.

It appears that Bernanke and the other Fed officials are not only firmly aware of the extent of the housing downturn but they are now also willing to share their outlook publicly.

Let’s examine the changes made to the FOMC housing sentiment in 2006.

May

“The Committee sees growth as likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.”

June

“Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.”

August

“Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.”

September

“The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.”

October

“Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace.”

December

“Economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market. Although recent indicators have been mixed, the economy seems likely to expand at a moderate pace on balance over coming quarters.”


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