Money and Metals

Zee News reports on the Fed meeting. "The US economy is facing uncertainties, both on the degree to which price pressures are contained and how much the economy might slow, IMF chief economist Raghuram Rajan said on Friday."

"'I think this is a time of a fair amount of uncertainty, because certainly there seems to be a shifting in the United States,' he said on the sidelines of a conference here. 'We`re not quite sure if inflationary pressures are contained ... and we are also not sure how far and how quickly housing will slow.'"

"He said there were 'substantial risks on the downside,' mentioning both the slowing housing market and lofty oil prices."

The Vancouver Sun. "The odds of a U.S. recession have increased dramatically, a Canadian bank economist is warning. The bank announced the odds of a U.S. recession have nearly doubled to 40 per cent from the 25 per cent it estimated in the spring. Its announcement came in the wake of further evidence this past week the U.S. housing market is going from boom to bust."

"We have long held the view that a bursting of the U.S. housing bubble would be bearish for the U.S. economy," the bank said in a statement issued at week's end.

It's only a matter of time before the surge in inventories leads to a nationwide decline in home prices that will erode personal wealth at a time when energy bills and debt obligations have hit record highs and that in turn will force consumers to cut spending and rebuild their savings, it said. 'Against this backdrop, we have decided to raise the odds of a U.S. hard landing,' it said."

"That means a recession of two straight quarters 'or worse' of shrinking economic activity, Gignac noted. The odds are still a bit greater the U.S. will avoid a recession, but 'we are close to the edge.'"

"'It's the single biggest risk to the U.S. economy and..we haven't seen the bottom yet,' said Patricia Croft, chief economist with Phillips, Hager and North Investment Management Ltd. 'There may be a bit of a lag but if the U.S. goes down we're going down with them.'"

The Burlington Free Press. "Fresh evidence shows that high energy prices and sagging home values are pinching the main driver of the U.S. economy; the average joe's wallet. Retailers and economists say many Americans are waiting to buy big-ticket items and cutting back on frills. Homeowners are shelving plans to remodel kitchens. Families are dining out less and tightening their budgets."

"'People are taking funds from one area and committing them to another, gasoline and utilities in particular,' said Gregory Miller, chief economist at Sun Trust Bank."

"Psychologically, this creates the opposite of the 'wealth effect' that kept upbeat consumers spending as stock prices rose in the late 1990s and real estate boomed after the recession in 2001, said Robert Weagley, chairman of the personal financial planning department at the University of Missouri."

"Meanwhile, this week's housing numbers show that the real estate market is likely to decline further as the number of unsold homes grows, further pressuring prices downward. 'I rarely find myself in a position where a single data release really snaps my head around,' Miller said. 'I'm beginning to question my assumption that this housing correction will continue to occur in a controlled fashion.'"