But obstacles to refinancing and access to credit for home purchases are limiting the support provided by low rates to house prices and consumption. Meanwhile, the large supply of foreclosed homes for sale – and the prospect that unemployment and negative equity will continue to feed the foreclosure pipeline – continues to put downward pressure on home values. The risk of further house price declines in turn discourages would-be buyers from entering the market. Continued house price declines could lead to even more defaults, foreclosures and distressed sales, undermining wealth, confidence and spending. Breaking this vicious cycle is one of the most pressing issues facing policymakers.   Next, cutbacks in employment and spending by state and local governments intensified in 2011 and are likely to continue. Looking forward, states are likely to cut spending further as the federal government stimulus aid to states peters out.   In addition, by current law, in 2012 the federal government will end much of the support it has been providing to the economy through stimulus programs. As these measures expire, households will be able to consume less and businesses will have less incentive to invest for a while. Plus, the new Budget Control Act calls for additional sharp cuts in federal spending. Our nation needs to get its public finances in order. Done correctly, with a focus on the long term, this could support confidence and growth. But it is very important to avoid excessive short-term cutbacks or tax increases that could harm the recovery.
William C Dudley: The national and regional economic outlook Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the Bronx Chamber of Commerce at the New York Botanical Garden, Bronx, New York, 24 October 2011. *  *  *  Good morning. I am very pleased to be at the New York Botanical Garden to speak to members of the Bronx Chamber of Commerce this morning. The Garden is one of the jewels of the Bronx and it is always a pleasure to speak with the business leaders of a community as vibrant as the Bronx. Over the past 20 months, I have been engaged in a series of outreach meetings all across my Federal Reserve District. I consider these visits just as important as my trips to Washington, D.C., to help formulate monetary policy or to Switzerland to shape international bank regulation. The understanding that I gain today will help ensure that my policy decisions reflect the public interest in the broadest sense. Each visit within the region helps me deepen relationships with the people I represent. As you may know, the New York Fed’s District includes all of New York State; 12 counties in northern New Jersey; Fairfield County, Connecticut; Puerto Rico; and the U.S. Virgin Islands. This year I have met with community leaders, businesses and elected officials around the region.