Forex Blog: Currency Trading News & Analysis.

July 4th 2005

Fed raises interest rates

Last week, the Federal Reserve raised US interest rates for the ninth consecutive time, to 3.25%.  Most economists and investors reckon Greenspan will continue coaxing interest rates upward towards that mythical neutral level, which will contain inflation without inhibiting economic growth.  Not all economists are as optimistic about the prospects of America’s economy, however. It seems much of the current economic growth is being driven by investment and consumption, which are financed through a disproportionately low cost of capital, and home equity loans secured through rising house prices, respectively. As interest rates continue to rise, it is inevitable these two factors of GDP will fall, spelling trouble for the US economy. The Wall Street Journal reports:

[Economists] were big bulls at the start of the year, expecting GDP to advance about 5.4% during the first half of this year…But now they expect growth of about 3% for the remainder of this year. Their index of leading economic indicators has been falling, and they worry that consumer confidence is fragile.

Read More: Economists See Modest Growth and Many Worries

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Posted by Adam Kritzer | in Politics & Policy, US Dollar | No Comments »

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© 2004 - 2024 Forex Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.