Latest From the Fed

In an interview with The Wall Street Journal, Chicago Fed’s Charles Evens said the Fed’s target funds rate could remain near zero into late 2010 or longer do to the weak job market and low inflation. Mr Evens said he expected core inflation (which excludes food and energy) to rise at a 1.5% rate and the current 10.2% unemployment rate to keep rising into 2010.

Federal Reserve Bank of St. Louis President James Bullard is quoted by the WSJ as saying he wants the Fed to continue to buy Mortgaged-backed securities beyond the current end-March 2010 cut-off date… ”I have advocated to keep the asset purchase program open but at a low level, and wait and see what happens, and as information comes in about the economy we can adjust that program while the federal funds rate remains at aero.” On Sunday, Bullard told the Dow Jones Newswires that “no decision has been made” about the program’s fate.

This week’s Fed’s minutes from the last FOMC meeting will not have any surprises.

Existing Home Sales

October’s Existing Home Sales rose by 10.1% to 6.01M, considerably higher than market exceptions for a smaller increase to 5.70M. This is the highest level since February 2007. Home re-sales are now 23.5% above their year ago level.

Inventory of Homes Available for Sale fell by 3.7% to 3,574K, which is 14.9% below its year ago level. This reduced the months supply to 7.0, its lowest level since February 2007. Now eyes are turning to the “shadow” inventory of homes available for sale, both from homeowners and financial institutions temporarily holding foreclosed homes off the market because of low prices.

Home Prices - Economist Steven A. Wood says that “Over the past year, average prices have fallen by 5.0% while median prices have tumbled by 7.1%. Year-on-year prices have declined in 38 of the last 39 months and are still falling moderately, partly reflecting a shift in the composition of sales to lower priced homes and partly reflecting the much lower prices associated with distressed sales.”