Speaking in Chile this morning, St. Louis Fed President William Poole said that while “there could be a recession” in the coming months, the Fed is not expecting it.
This echoes Ben Bernanke’s speech earlier this week in which he stated that the U.S. economy still has room for growth.
Poole’s comments are soothing markets at the end of a volatile week for mortgage rates and what will likely be the worst one-week slide in stock prices since 2002.
The biggest wild card to mortgage rates today and through early next week is the continued stigma attached to sub-prime lending.
There is a growing concern that defaults will spill over to other sectors of the economy, raising the overall risk in mortgage lending. With higher risk comes higher rates — sub-prime borrower or not.
(Image Courtesy: Federal Reserve)