According to William Dudley, the president of the Federal Reserve Bank of New York, the risk of a double-dip recession is still quite low.
Dudley said that only some of the the restraints on growth, such as high oil prices and Japan‘s earthquake in the first half of the year, can be considered temporary.
“The risks have risen a little bit, but I think we very much still expect the economy to recover. We expect … growth to be significantly firmer than it was during the first half of the year,” he said. “But obviously there is some concern.
The central bank‘s policy-setting Federal Open Market Committee (FOMC) took the unprecedented step last week of promising to keep interest rates near zero for a set period of time—at least until mid-2013. The Fed also said it was weighing other options to help strengthen a weak recovery.
Dudley said that market interest rates fell after the announcement, “which should help provide some additional support for economic activity and jobs.” The president of the New York Fed has a permanent voting position on the FOMC and plays a prominent role within the U.S. central bank.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +21 basis points last week which helped to move mortgage rates lower from last Friday to the prior Friday. We did pull back from our our best levels of 2011 which occurred in the middle of the week. The gains were primarily due to much weaker than expected economic news as well as continued concern over weakness in Europe.
MICHAEL MCDEVITT 