federal reserve

Thursday, June 20, 2013 – 12:30 p.m.

The U.S. Federal Reserve Open Market Committee is definitely in a corner.

Just the spectre of the Fed ending its $85 billion a month bond buying program has made interest rates shoot up nearly 75 basis points in a month, and stock markets around the world to start tanking.

The 30-year mortgage rate will easily hit 4.25% next week.

Talk about throwing water on a said-to-be ‘recovering’ housing market. Hundreds of thousand of potential buyers were just eliminated, and the Fed hasn’t even taken any action.

Could this be the fastest housing cycle in history? Housing prices, in the past year, have shot up so fast that many properties have recovered their pre-great recession levels. An actuality that is highly suspect to say the least.

A resurgence in gas prices, combined with highest interest rates in more than a year, is definitely a damper on economic growth. Investor groups, who conducted mass purchases of foreclosed properties earlier this year, might be getting a little queasy right about now.

But in all likelihood, the Fed has no choice but to continue its bond buying program for the forseeable future. Otherwise the air shoots out of the current real estate and stock market bubbles.

And no one wants that!

The Fed has to wait for the economy, if it ever happens, to strengthen to the extent that any pullback in its purchase program can be absorbed in a normalized marketplace.

Whatever normalized is!