Fed Policy, Interest Rate Movement...Recession?

Monday

Feb112008

Monday, February 11, 2008 at 08:19AM

The rate drops are getting more interesting. On February 6, a Governor from the Fed’s Penn Board said that they would likely hold rates constant as inflation was rising. Then the ISM (Institute for Supply Management) non-manufacturing index came out with the biggest drop on record consistent with the US being in a recession. The rate probabilities for the March meeting were about a 40% chance for a drop to 2.25%. As of today after the ISM announcement, there is only a 15% chance for 2.5%, but now a 25% chance for 2.00%. We need at least another point drop to get us into recovery territory. Maybe Bernanke finally realizes this and is more ready to act the Greenspan would have. Rates may get into the 50+ year low 2003 range once again.

Stuart Hardy, Ph.D.

Broker - Economist - Consultant

Kevin |

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