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August 22nd 2008

Bernanke: Fed to Hold Rates Steady

In his headline remarks at the annual conference for members of America’s Federal Reserve Bank, Chairman Ben Bernanke reiterated his comfort with the current level of interest rates. He argued that while interest rates are certainly low by historical standards, a decline in inflation over the next few months should bridge the gap between the two. In addition, the credit crisis remains ongoing, and it is clear that Bernanke is more concerned about economic growth than inflation. Bernanke’s comments are supported by the recent Dollar rally and the simultaneous easing of commodity prices. At the same time, data indicate that over the last twelve months, prices have risen at the fastest pace in nearly 17 years. If futures contracts are any indication, investors basically accept Bernanke’s position, but not by much. Bloomberg News reports:

Traders added to bets that the Fed will increase borrowing costs by the end of the year, futures prices show. Odds of at least a quarter point boost in the main rate by the end of December rose to 32 percent from 18 percent yesterday.

Read More: Bernanke Says U.S. Inflation Should Slow Into 2009

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Posted by Adam Kritzer | in Central Banks | No Comments »

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