NY Fed President Talks Tapering
- Sep 24, 2013
Last week’s decision by the Federal Reserve not to taper QE3 left an open question: When will the tapering begin, since presumably it has to sometime? Speaking on Monday at Fordham Wall Street Council, Fordham University Graduate School of Business in New York, N.Y. Fed president William C. Dudley addressed that question. Though not making a firm statement of intent—the Fed rarely offers those—he did discuss the central bank’s rationale for continuing the stimulus policy.
“To begin to taper, I have two tests that must be passed: (1) evidence that the labor market has shown improvement, and (2) information about the economy’s forward momentum that makes me confident that labor market improvement will continue in the future,” he said in his remarks. “So far, I think we have made progress with respect to these metrics, but have not yet achieved success.”
Regarding the first condition, Dudley noted that the decline in the U.S. headline unemployment rate since last year—8.1 percent to 7.3 percent—“overstates the improvement in the labor market.” Other metrics of labor market conditions, such as the hiring, job-openings, job-finding rate, quits rate and the vacancy-to-unemployment ratio, collectively indicate a much more modest improvement in conditions.
As for the second “test,” Dudley cited a number of headwinds for the economy, but none more immediate than the dysfunctional nature of the U.S. Congress. “Fiscal uncertainties loom very large right now as Congress considers the issues of funding the government and raising the debt limit ceiling,” he noted.
LPS: Home prices still rising
On Monday, Lender Processing Services released its latest LPS Home Price Index report, based on July 2013 residential real estate transactions. The report found that home prices nationwide were up 0.6 percent month-over-month in July, and up 8.7 percent since July 2012.
The index is still off 14.7 percent from its peak in June 2006, with some markets much further off peak. In metro Las Vegas, for example, prices are 46.1 percent less than peak; in Orlando, prices are off 38.8 percent, and in Riverside-San Bernardino the drop is 37.6 percent. On the other hand, Austin, Dallas, Denver, Houston and San Antonio are at new peaks, according to the company.
The LPS index combines the company’s property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. Zip Codes. It represents the price of non-distressed sales by taking into account price discounts for REO and short sales.
Wall Street had a mild down day on Monday, with the Dow Jones Industrial Average losing 49.71 points, or 0.32 percent. The S&P 500 was down 0.47 percent, and the Nasdaq lost 0.14 percent, despite Apple stock spiking nearly 5 percent on ultra-strong sales of its latest gizmo.