The Ups and Downs of Wall Street

Well, the economy of the United States is slowly, but surely beginning to improve when compared to the past few years, during which financial markets were gravely suffering. Despite of experiencing a slowdown in housing and the decline of mortgage applications, Chairman of The Federal Reserve, Ben Bernanke strongly feels that the outlook for inflation, in the near future, is simply put, “benign”.

Nonetheless, that still means that inflation remains a risk, and if the need be, the Fed is ready to take necessary measures. (If you know what I mean). To the Senate Banking Committee, Bernanke, emphatically claimed that the outlook for the coming year, in terms of the economic prosperity of the United States, is very optimistic. Despite the lag from the diminishing housing market, the U.S. economy will advance at a moderate pace.

The primary uncertainty that the Fed is dealing with is undoubtedly commodities such as oil and their arcane, and usually unpredictable prices. The rates presently sit at 5.25 percent, however, as Bernanke puts it, the Federal Reserve "is prepared to take action to address inflation risks if developments warrant."

Financial analysts feel that Bernanke’s outlook for the future means that the prices for US stocks and bonds will rise, the value of the dollar will rise, and the Fed will begin to reduce rates sometime this year. He also expects the Gross Domestic Product to grow. Even though the housing market showed minor signs of getting “back on track”, the economy would not immediately begin to skyrocket. There exists a strong disinterest in residential investment and its weight will continue to press down upon economic growth in the coming months, if not quarters.

Moreover, as far as the job market is concerned, Bernanke feels that the pace of hiring will slow down quicker than people normally expect in today’s market. As “baby boomers” begin to retire and job growth slows down, economic activity could be affected in more than one way. US exports among American trade partners are growing in a robust way. As of now, the Fed has no true timetable that explicitly states when and if they will make any changes to rates or anything of that sort. We will just have to wait and see how, when, and if the constantly changing financial markets pave a clear path indicating the future of America’s economy (The keyword: if).