House prices are still too high and the inventory of unsold homes too large to believe that the housing correction is over, according to Federal Reserve Governor Donald Kohn.Mr. Kohn told the Atlanta Rotary Club that house prices are "still high relative to rents and interest rates," even though price rises have decelerated nationally and prices have fallen in some markets. While there are tentative signs that housing demand is leveling off, "housing activity may not yet have found a floor, given the sizable overhang of unsold houses," the Fed governor said. He also warned that a possible stabilization in the housing market might not be "immune" from a rise in long-term interest rates. Mr. Kohn commented in this speech that the Fed continues to be concerned about inflationary pressures -- signaling that the markets should not anticipate a cut in the target federal funds rate (the interest rate banks charge each other for overnight loans) anytime soon.

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