Another non-event of Fed meeting this week
Posted by Frugal on June 27th, 2007
Interest rate will stay at 5.25%. Fed governors will again emphasize the inflation risk verbally. But the longer Fed holds out for not cutting interest rate, the worse the housing markets will get. I don’t know what Fed has in mind. You can print money to buy stock futures. You can print money to keep loans and leverages up. But can you print money and buy individual houses? I don’t think that Helicopter Ben is that crazy yet. Besides, he is really under fire from all the Democrats.
The monetary tide in housing credit boom has turned. The bond king Bill Gross said that Fed will cut interest rate in the next 6 months. With all the loan delinquency surging, I don’t know any other ways around for Fed. Personally I just think the Fed is trying to build up an image of credibility as an inflation fighter, keeping the US dollar up, while keeping the precious metals down. This is probably just all under plan. The only thing that I am not sure is whether Fed is over-confident about its maneuver and over-stay the 5.25% interest rate.
We’ll see what happens later in the year. Maybe with the two trips to China, Ben and Paulson haven’t hammered out a deal with the Chinese. Yeah, bonds are dropping, and 10-year notes still refuse to drop their yield below 5.0%. That’s a showing of weak demand.
More related posts:
Digg it Del.icio.us Reddit Furl BlinkList Newsvine Yahoo MyWeb
June 28th, 2007 at 1:23 pm
The Fed is stuck between a rock and a hard place, we have high inflation with a slowing economy. They have no choice but to leave rates where they are and “hope” that the economy picks up or inflation lets up. I don’t see either happening in real terms anytime soon.