Update: Fed: Housing correction “intensification�

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Good afternoon. We’ve been stuck in meetings, we apologize. As you know, the Fed cut rates today by a quarter of a point. You can read the Fed’s statement here. The headline quote: ‘Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.’

We read this two ways: the credit crunch eased somewhat, but the Fed sees more economic trouble coming from the weak -- weakening? -- housing market. Is the housing market weakening? Technically, the Fed didn’t say that -- it sees that as a likely possibility.

Update: Commenter Cal writes, ‘You don’t think they are saying housing is weakening? Intesify a correction? How could it mean anything but?’

Fair point, let us explain our hair-splitting here, because we believe the Fed is in the hair-splitting business: The Fed said is likely the economy will slow ‘reflecting the intensification of the housing correction.’ There are two ways to read this: one is that the housing correction has already intensified -- gotten worse, and it’s likely that will hurt the economy; the other is that the housing correction will get worse in the future, and it’s likely that hurt the economy going forward. As we said, it’s splitting hairs, but it allows the Fed to have it both ways.

Our take: We think the housing correction has intensified in recent weeks, and will intensify further.

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Photo Credit: Reuters