Better therefore to wait rather than a mistake

For the second time in a row, the American Central Bank (Federal Reserve or Fed) left, yesterday, its unchanged interest rates to 5.25 (see also page 36). After pass the rent money from 1 in 2004 to more than 5 in June 2006, the Fed decided in August to agree a break for the first time in 18 meetings of the Council of monetary policy. As the meeting of August 8, only one of eleven Governors has voted for a new increase of rates, but it is not excluded that at the next meetings of October or December the Governing Council conducts a new round of monetary screws.

The Fed left its monetary policy unchanged, if the circumstances which had pushed him to do so six weeks ago have not yet clearly evolved. End of August, the publication of the minutes of the meeting in early August showed that the break was to "to the Committee to accumulate additional information before judging the desirability of a new tightening".

To give a little time

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In the short release published yesterday, the Fed shows once again that between inflationary threat and threat on the growth, considers not having yet all to decide. Better therefore to wait rather than a mistake. Showing too lax, it would indeed leave reappear the specter of inflation. Showing however too narrow, it could run the risk of breaking the springs of the American economy already facing a slowdown (growth of 2.9 of the gross domestic product in the second quarter against 5.6 on the first three months of the year). Before deciding, Ben Bernanke, the Governor, and its teams want therefore to give a little time.

The Bank, which, since the beginning of the year, preferred to act to try to keep under control the inflationary pressures, explained yesterday that the "risk subsist was." After a long period under review, the cost of labour is distributed upward ( 4.9 in unit labour costs over 12 months) and a skid on this front can be excluded. The recent weakening of the price of oil and raw materials could have a positive impact, but new threats now weigh on growth.

Concern about real estate

After a relatively serene on the vitality of the US economy, more and economists worry the sharp degradation of the real estate market. At the time starts fell to their lowest level in three years (decreased by 6 in August, to 1.6 million in annualized pace,) a decrease of 19.8 over a year, some experts believe that the Fed has already proved too restrictive. Jim Dorsey, Global Insight, note as well: "We expect that the decline in housing starts weighs significantly on the growth of the third and fourth quarters 2006." This phase of decline looks a little more rough and disturbing than had expected the Fed.

More measured, Citigroup economists point out that "the net decline in investment in the stone is committed for a year and this did not prevent the US economy to grow (...)." The decline of real estate will continue to weaken somewhat economy progressed at a pace higher than normal. At the same time, the industries not related to real estate, they continue to recover. "The Fed, who previously spoke of"real estate market cooling gradually", acknowledged yesterday that degradation was more"gradual"by skipping this word of his release.