Some housing bubble news from Washington. "An index of U.S. leading economic indicators fell in May by the most in nine months. The Conference Board's index last fell in consecutive months in February and March 2001. 'The Fed is going to get exactly what it was hoping for, but unfortunately the inflation numbers are just not helping,' said Haseeb Ahmed, an economist at JPMorgan Chase Bank."

"Building permits, a sign of future construction, subtracted 0.06 percentage point from the index. The Commerce Department said this week that permits dropped in May to the lowest level since November 2003."

"'The builders have known that the boom market we've been in is not going to last forever,' Mick Pattinson, CEO of Barratt American Inc., said. Carlsbad, California-based Barratt builds homes in the western U.S. 'We have cut back our building a little bit, but not tremendously.' Pattinson said there has been an increase in order cancellations at Barratt, though 'not on a massive scale.'"

"U.S. home construction rebounded in May from a 13-month low as builders filled backlogged orders and offered incentives such as free landscaping to woo buyers. 'The message the Fed's going to take away from this starts report is that the roof's not caving in on housing and they can keep raising interest rates,' says economist Stuart Hoffman. 'Housing is in a downturn, but it's the orderly downturn the Fed wants.'"

The Milwaukee Journal Sentinel. "The U.S. economy is slowing, but is strong enough to avert a recession if the Federal Reserve Board acts responsibly, Anthony Chan, chief economist for JPMorgan Private Client Services, said. A slowdown in the housing market and a relatively flat yield curve are signs of a weakening economy, he told clients."

"Both are consequences of the Fed having aggressively raised the short-term rates it controls from 1% to 5% since June 2004."

"But Chan said that according to his research of historical trends, the weakness in the housing market is not large enough to indicate a recession will follow, while the interest rate inversion is also small historically."

"Based on the public statements of Fed officials, Chan said he believes the Fed will raise rates by another quarter-point when it meets next week. Another increase in August may also be in the cards, Chan said. Neither increase is really needed based on his reading of the economy, Chan said."

"The Fed 'has to raise rates because there is a new Fed chairman (Ben S. Bernanke), and they have to establish credibility' as inflation fighters with the financial community, Chan said."

"However, Chan said that should the Fed push rates over 6%, 'I will be talking about what kind of a recession we will have.'"