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over reaches, Adams said. will happen is that some people who could buy a house before won be able to now. Some of the mortgage programs will go away, costs will go up and lending ratios will be tougher. But more aggressive action over the next year could backfire, he said.
Tom Adams, owner of Century 21 Adams Barnes in Monrovia and Glendora, said the central bank initial pullback in December was good timing.
compared with 8.5 percent the previous month and 9.8 percent a year earlier, according to the most recent figures from the state Employment Development Department.
That came as welcome news to investors, who boosted the Dow Jones Industrials by nearly 200 points following Yellen most recent testimony. economy back on track.
Will further cuts undermine the shoring up that has occurred? Michael Carney, an economist at Cal Poly Pomona, doesn think so.
But what will be noticed is the Dodd Frank Act. And new rules under the act that went into effect in January will tighten things even more.
Carney said the economy is looking better, although high unemployment continues to be worrisome.
That results in higher prices for products and services.
Will further pullbacks from the Fed slow America
think the Fed chose a good time of year to do it, he said. billion out of the marketplace in January probably won be noticed. Jimmy Choo Trainers Sale Black
before the House Financial Services Committee, newly appointed Fed Chair Janet Yellen said she supports Bernanke approach.
consider this to be the big negative, he said. doesn seem to be much of a change, and many of those long time unemployed will never get jobs again because they don have the skills that are needed for today jobs.
The Federal Open Market Committee has said that activity is expanding at a moderate pace. Labor market conditions have shown further improvement; the unemployment rate has declined but remains elevated. Fed softened the impact of its pullback by signaling that it plans to keep short term interest rates at record lows for longer than previously thought.
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The central bank began reducing its purchases of Treasurys and mortgage backed securities in January and another $10 billion cut was announced later that month. Former Fed Chairman Ben Bernanke indicated that the Federal Open Market Committee will take measured steps at future meetings to reduce the program, which began in September 2012.
A continuing pullback from the Fed would also hike interest rates on auto financing, student loans and mortgage loans. Consumers looking to buy cars could get a break, however, if dealerships choose Giuseppe Zanotti Butterfly Shoes to offer deeper discounts to offset a decline in sales.
Carney said continued tapering by the Fed will hike long term interest rates.
will definitely go up, he said. is a nervousness that long term rates will suddenly jump up, but I don think that will happen. I think the Fed will do it gradually. They won do anything to disrupt the slow recovery we have underway. much rates go up and how fast they rise will depend largely on whether investors pick up the slack. If other bond buyers come to the plate in the coming months, rate increases over the year will be small.
Fed forecasts always overshoot economic performance, McBride said. have to be realistic. But they also don want to come across as pessimistic, so their forecasts tend to always overshoot economic performance. said the nation will continue to experience growth, although that growth will likely proceed at a fairly slow pace.
The decline was welcome, but the rate still landed well above the nation jobless rate of 6.7 percent. Unemployment in Southern California has remained considerably higher. Los Angeles County jobless rate for December was 9.2 percent and the Inland Empire was 8.9 percent.
When the Fed pulls back on its bond buying it becomes more expensive to borrow money and that hikes interest rates. So businesses that are dependent on credit will likely see their costs go up. And when costs rise too much, some of that gets passed along to consumers.
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And then there always the unexpected. Will the nation face some kind of calamity that sets the economy back?
knows that they have to scale it back at some point, he said. think the market anticipated it to some extent because the Fed had given hints before, which scared investors quite a bit. But the market taking it quite well. And if the Fed believes that the economy is doing OK . then stock prices should go up. The Standard Poor 500 index had its best year since 1997 with an annual gain of nearly 30 percent. The Dow Jones Industrial Average posted a yearly gain of 26.5 percent and the Nasdaq composite index rose 38.3 percent for the year.
So what does all of this mean for businesses and consumers?
If that doesn happen, jittery investors could bump rates higher at a much faster pace. Short term rates likely won be affected until late 2015 when the nation economic picture is better and unemployment is lower, experts say. That would allow the Fed to boost the federal funds rate.
America slow but steady recovery from the Great Recession has been fueled at least in part by government stimulus.
So it was not surprising when businesses and consumers became skittish in December after the Federal Reserve announced it would begin trimming its quantitative easing program. Fortunately, the cut was relatively minor if you can call cutting $10 billion from an $85 billion a month bond buying program minor.
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