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Fed’s headache over rates move
Evening Standard 5 Aug 2008
Ben Bernanke and other top policymakers at the US Federal Reserve today face a bewildering array of conflicting data as they meet to set the course for future interest rates.
On the one hand, soaring energy costs and rising consumer prices suggest rates should go up. But with house prices across the country down 16% on a year ago and shoppers becoming more cautious, the Fed will be loath to add more gloom.
Most economists agree that the only real course for the Fed is to keep short-term benchmark interest rates unchanged at 2%. Some argue that actual rates in the marketplace are higher than the benchmark suggests.
“While the Fed funds rate has been cut aggressively, market rates overall from mortgages and corporate borrowing have actually increased as the credit crunch and inflation concerns have pushed up lending rates,” ING Bank says.
