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Losing sleep on commercial property US commercial real estate problems could derail the country’s economic recovery later this year, a top Federal Reserve official said on Monday. “Many banks are pretty heavily exposed to commercial real estate. It is also a big part of the securitization market.

So commercial real estate is one that concerns me,” said Federal Reserve Bank of Atlanta President Dennis Lockhart. Lockhart, a voting member of the Fed’s policy-setting committee this year, said that around US$400B of commercial real estate refinancing was hanging over the market and he was monitoring its progress with care.

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The U.S. Federal Reserve began a two-day policy meeting yesterday, it is expected to lower interest rates toward Zero and discuss emergency tools to end the country’s year-long recession. Observers expect the U.S. central bank to lower its target for benchmark overnight rates by at least 50bp to 0.5 percent and state it will deploy quantitative easing measures to restore growth. US industrial production fell 0.6% in November, with manufacturing output shrinking 1.4% to put it 7.3% below its year-ago level. A separate index of manufacturing activity in New York state hit a record low in December. The data offered a fresh sign that an already year-old US recession is deepening underscoreing the need for aggressive and unconventional actions by the central bank’s policy-setting Federal Open Market Committee. Some economists expect U.S. output to shrink at a 6% annual pace or more in the Q4 2008..

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