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November 19th 2007

Fed to Hold Rates?

In a recent speech, a prominent Federal Reserve Board governor strongly hinted that the Fed would maintain US interest rates at current levels at the Fed’s next meeting.  The Fed is caught in the delicate position of trying to balance economic growth with the specter of inflation.  While technically the Fed is always trying to meditate between these two outcomes, its current position is especially tenuous since the US economy is trending downward while inflation trends upward.  Despite the emphatic claims to the contrary, futures markets are still pricing in a rate cut, setting the stage for a showdown with the Fed.  As usual, the Dollar’s fate hangs in the balance.  The Financial Times reports:

Mr Kroszner said that in the near term "the economy will probably go through a rough patch" with falls in house prices, home construction and subdued consumer spending. He did not rule out a future cut in rates.

Read More: Fed and markets set to clash

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Posted by Adam Kritzer | in Central Banks, US Dollar | No Comments »

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