Even Cheaper Loans Coming After Fed Announcement?

Sep 13, 2012 8:08am

Morning Business Memo:

A big announcement may be coming from the Fed today but will it really make a much of a difference to the US economy and interest rates? Economists are divided about the impact. But if it’s successful mortgages and other loans could be even cheaper than they are today. Federal Reserve Board Chairman Ben Bernanke is likely to announce QE3 — that’s wonk-speak for a new round of bond buying. The aim is boost lending, cut interest rates and push up stock prices, all in a bid to spark more economic growth.

The problem is rates are very low already, and critics of the Fed worry this could push up inflation in the future. Markets believe a move by the Fed would make a difference. Stocks have risen in anticipation of the announcement. The Dow Jones index rose 10 points yesterday and is now at its highest level since December 2007. The Fed may also decide to extend ultra low interest rates until 2015. An announcement is expected today around 12:30 p.m. Eastern time. Later, Chairman Ben Bernanke will hold his quarterly news conference.

Are you worse off than you were fifteen years ago? A new Census Bureau report says household incomes sunk to levels last seen in 1995. After accounting for inflation, the report says the median, or midpoint, household income was $50,054, 1.5 percent lower than 2010 and a second straight decline. The gap between rich and poor grew again. The poverty rate remained unchanged with 15 percent of households living below the official poverty line.

The home foreclosure crisis is still with us, but a new report suggests the worst is over, especially in some of the worst hit states. Foreclosure listing firm RealtyTrac says 15 percent fewer homes were placed on the foreclosure track last month than in August last year, when they hit a 17-year high. But the numbers are diverging along state lines. More homes entered the foreclosure process in Florida and New York, where the courts must sign off on property seizures. In many non-judicial states, such as California and Arizona, the number of foreclosure starts declined versus August last year, because those states didn’t have a big backlog of action.

A big challenge to Boeing as EADS, the owner of Europe’s Airbus and Britain’s BAE Systems are in merger talks to create the world’s biggest defense and aerospace company. Boeing is now the world’s latest aerospace firm. European financial analysts are skeptical the merger will go through in its current form. A rival bid for BAE could be made by another defense company.

A federal bankruptcy judge in Dallas has approved three labor contracts that were ratified by union workers at American Airlines. The judge approved deals with flight attendants, mechanics and maintenance clerks. The pilots rejected a company contract offer last month, and American was expected to begin imposing pay and work terms on them. The company is declining to comment.

Richard Davies Business Correspondent ABC NEWS Radio ABCNews.com twitter.com/daviesabc 

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