New Worries on Inflation and Homes By VIKAS BAJAJ
Published: February 27, 2008
Houses are getting cheaper by the month. Everything else is becoming more expensive.
Several economic reports released on Tuesday provided fresh evidence that the economic pain of a prolonged slump in housing is being compounded by the rising cost of oil, food, clothes and other goods. Not surprisingly, a measure of consumer confidence fell to its lowest level in nearly five years.
In addition to squeezing American homeowners, the confluence of falling home prices and accelerating inflation is putting policy makers in an increasingly tough position. If they move aggressively to cut interest rates and stimulate the economy, they risk fueling inflation further at a time consumers are already strained. But if they fail to act boldly, the economy could weaken faster.
“The Fed is now having to walk a very fine line,” said Jane Caron, chief economic strategist at Dwight Asset Management, an investment firm that specializes in bonds. “We have clearly seen an acceleration in inflation pressure in the last couple of months and the risk is that the markets are going to react negatively to aggressive easing going forward.”
Nonetheless, the stock market rebounded from an early decline on Tuesday to close up for the day. The Standard & Poor’s 500-stock index rose 0.7 percent, to 1,381.29, and the Dow Jones industrial average was up 114.70 points, or 0.9 percent, to 12,684.92. .......(more)
The complete piece is at:
http://www.nytimes.com/2008/02/27/business/27econ.html?_r=1&oref=slogin
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