Analyst: Housing Is Key To U.S. Economy

Many analysts say housing is the key to the future direction of the U.S. economy as well as the Fed's monetary policy and the financial markets. Joseph Keating is one of those. He's Chief Investment Officer at First American Asset Management.

Keating appeared on "Squawk on the Street." Keating believes the Fed can't raise rates as long as the housing market remains in a "recession." He said housing prices got too high and inventory has yet to wear off. He said it's getting better--but housing has a ways to go before being really healthy.

Keating said it's possible that the housing bottom could spread to other areas of the economy. He said that possibility could force the Fed to lower rates in 2007. And he said two areas to watch in the months ahead are--unemployment and core inflation. He said both of those will determine which way the Fed goes in regards to interest rates.