The FOMC minutes came out today. "Federal Reserve policy makers, in Chairman Alan Greenspan's last interest-rate meeting, said more rate increases may be needed because inflation has been 'somewhat higher' than acceptable, minutes of the session showed. 'In the view of some members, the possibility of additional policy moves was reinforced by readings on core inflation and inflation expectations that were somewhat higher than was desirable over the long run,' the Federal Open Market Committee said in documents released today in Washington."

"'The risk exists that, with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path,' and may put 'further upward pressure on inflation,' Ben Bernanke told House and Senate panels last week in his first congressional appearance since becoming chairman. 'In these circumstances, the FOMC judged that some further firming of monetary policy may be necessary, an assessment with which I concur,' he said."

"While a sharp slowdown in housing would spell trouble for the economy, the Fed minutes suggested that the most likely outcome was a gradual moderation. That was also consistent with the message Bernanke delivered to lawmakers last week."

Danielle DiMartino had this at the Dallas News. "Now that the air is coming out of the (housing) market, many are offering soothing reassurances that the landing will be 'soft' and not spill over into the broad economy. Should we be lulled into a sense of comfort?" "I dare say our new Federal Reserve Chairman Ben Bernanke would answer no, at least for now. In last week's congressional testimony, Mr. Bernanke hit on many of the red flags the data have raised recently, purchase activity is down, inventories are up, price gains have cooled, and it's taking longer to sell a home. Encouragingly, he vowed to keep a close eye on the housing market."

"The following are relevant to the direction of interest rates: Freddie Mac just released figures that showed homeowners withdrew a record $243 billion in cash from their homes in 2005, $100 billion more than the prior year. Mr. Bernanke's advisers will point out that this money was a result of home price gains alone, not declines in interest rates, which rose throughout 2005."

"An estimated $2.5 trillion of household debt is set to reset at higher interest rates in 2006. Given the higher level of interest rates, it is safe to say debt-service costs will easily exceed their current record 13 ¾ percent of after-tax income. Homebuilders have warned in recent weeks of declining sales, contract cancellations, falling prices and earnings misses."

"Foreclosure activity was up nearly 16 percent in the fourth quarter in red-hot California. Dallas-area foreclosure postings were up 17 percent in the first quarter over the same quarter of 2004."

"Housing inventories have more than doubled in such key markets as Washington, D.C., Miami, Los Angeles, Manhattan and Boston. The next two years will prove a critical test for the subprime market, which is six times bigger than it was 10 years ago, as monthly payments reset at much higher interest rates."

"The biggest irony for Mr. Bernanke as he mulls which way to steer monetary policy is the pressure exerted on his decisions as a result of the housing boom. Builders broke ground on a record number of homes in January and consumer spending came in at three times economists' forecasts. The resultant economic strength will all but necessitate the Fed to keep raising rates."