USA Today has recently reported that Federal Reserve Chairman Ben Bernanke will continue record low interest rates in order to avoid crippling the frail American economy. In his address to Congress this past Thursday, Bernanke confirmed speculation that these rates will continue, as well as affirming its implementation will remain intact until economic conditions dictate otherwise. This has special significance for the housing market, as it continues to take advantage of exceptionally low lending rates.
Bernanke, in testimony to the House Financial Services Committee, essentially repeated the rationale behind the Fed’s decision last week to hold rates near zero. He cited still-fragile economic conditions, and noted that inflation is low, which gives the Fed leeway to keep rates at rock-bottom levels.
The Fed chief didn’t offer new clues about when the central bank might reverse course and start tightening credit. He said that would need to happen when the “expansion matures.” Some investors and analysts think higher rates could come in the fall.
Deciding when to tighten credit is the biggest challenge facing Bernanke, whose second term started in February. Moving too soon could short-circuit the recovery. Waiting too long could unleash inflation and sow the seeds for new speculative bubbles in stocks or commodities or other assets.
With unemployment continuing to hover around ten percent on a national scale, it is important to continue to facilitate credit lending. The housing industry in Hawaii has benefitted greatly from the low rates, though its current condition can still be considered sub-par of its 2007 strength. Furthermore, many private banks such as Bank of America are now deciding to release many of their most disconsolate homeowners from the debts in which would surely lead to foreclosure. Though our continued economic recovery is not definite, the preservation of exceedingly low interest rates will continue to be a welcomed certainty in uncertain times.
The entire article may be accessed here: Bernanke: Record-low rates needed to aid economy
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