Fed’s High Wire Inflation Fighting Effort Risks Triggering a Recessionary Fall

Imagine a high-wire act performed without a net.  That describes the Federal Reserve’s effort to curb inflation without crashing the economy.  Success will bring applause and relief; failure, a brief downturn, at best, with a prolonged recession the worst case outcome. 

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Concerns about the demise of overdraft protection programs, and the loss of fee income for banks resulting from it, may be overstated. After surveying more than 1,300 consumers nationwide, ACTON Market Intelligence found that 58 percent of them will, in fact, opt out of overdraft protection when given the opportunity to do so. But the vast majority of bank customers who use the overdraft service will opt in, the survey found, and they will pay a higher fee, if necessary, in order to continue the service.

Homeowners in Massachusetts and other states have successfully challenged foreclosures initiated by lenders and servicers that could not document their right to foreclose. But what about the innocent buyers who purchase properties at foreclosure sales later found to have been improper? Should they be allowed to retain ownership of those homes?

Mortgage delinquency rates increased in the first quarter, up 59 basis points from the fourth quarter and 94 basis points above the year-ago-level. But the rate at which lenders are initiating foreclosure actions declined by 14 basis points (2 percent) year-over-year. So is the delinquency/foreclosure picture getting better or worse? Good question, with statistical evidence to support either conclusion.

The unemployment rate increased to 9.9 percent in April, and that represents good news for the economy. Good news? Well, yes, actually, counterintuitive though that seems. The increase from 9.7 percent in March indicates that workers who had previously given up on finding jobs have re-entered the market, encouraged by reports that employers are beginning to hire again. And that appears to be the case.