Fed considers more easing as housing weighs on recovery

The exceptionally weak housing market continues to weigh down any significant economic recovery, and the Federal Reserve is considering more monetary accommodation. The minutes of Nov. 1-2 meeting of the Federal Open Market Committee show central bank policymakers believe recent data continue to point to a tepid economic outlook and “appear to reinforce market expectations that additional policy accommodation would be forthcoming in the near term.” The FOMC said “consumer pessimism about the outlook for jobs and income, the depressed rate of household formation, and tight underwriting standards for mortgages” keep Americans from buying new homes despite historically low interest rates. And the decision by some lenders to stop selling properties that have been foreclosed upon will further hinder home sales over the near term, according to the FOMC. The Fed said the housing sector remains depressed and foreclosures continue putting downward pressure on home prices and housing construction. Some members expect disputes over mortgage and foreclosure documents to delay the eventual recovery of the sector, according to the minutes. The committee expects low interest rates to help stabilize commercial real estate prices somewhat, but the market is still weak and the availability of credit remains limited. The FOMC minutes also show plans to have Gov. Janet Yellen be the chairman of a Fed subcommittee that will review the central bank’s communications guidelines. Earlier this year, Chairman Ben Bernanke held the first press conference the Federal Reserve had immediately following its monetary policy decision, the most recent of which received one dissenting vote. Thomas Hoenig, outgoing president of the Federal Reserve Bank of Kansas City, once again voted against the FOMC action, as he has all year. Hoenig believes additional quantitative easing “would risk a further misallocation of resources and future financial imbalances that could destabilize the economy.” Hoenig was recently nominated to become the vice chairman of the Federal Deposit Insurance Corp. The FOMC meets again Dec. 14. Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw