Fed Watch: Will Rates Rise in June?
A: The fed meets at the end of June in what is setting up to be a very interesting debate: WILL THE FED PAUSE RAISING INTEREST RATES? Because Bernanke is so new I just have no idea whether he will throw a curve ball and PAUSE at the next meeting.
According to NewRatings.com:
Analyst Alexander P Paris of Barrington Research says that the Fed Funds futures market is pricing in a 72% chance of an interest rate hike on June 29.At least with Alan Greenspan I would know that during inflation fearing times he would be right on top of it (which what contributed to his reputation of 'overshooting') as his thinking was that the effects of inflation are far more damaging than the effects of a possible future recession (which may or may not occur).
If I were to break it down and guess what the chances are for a hike or not, it would look something like this:
75% Chance of 1/4 point hike (25 basis points)
17% Chance of a PAUSE
8% Chance of a 1/2 point hike (50 basis points) w/ clearer statement
Why not! Its just a guess right. Since energy prices are still high and climbing (Oil near $73/Barrel), I just don't see how the fed can sit tight and wait. If anything, they must show their willingness to combat this very dangerous inflationary pressure. But who knows. Its a new fed chief and he might carve his own little personality into it and become the best fed chief we ever had. Maybe not. Certainly keep an eye on this upcoming meeting as we'll get our first insight into how Bernanke reacts in times like these!
OTHER NEWS SOURCES, MARKETS & BLOGGERS THOUGHTS
Inflation fears sent stocks plunging Monday after Federal Reserve Chairman Ben Bernanke warned that the central bank remains determined to keep lifting interest rates until price increases are under control. The Dow Jones industrials were off 155 points in late trading. Bernanke told an international monetary conference that while rising energy costs have helped slow the pace of economic growth, higher core inflation -- excluding energy and food -- is still a concern and could warrant more rate tightening.
The economy has displayed some weakness in the last month, oil prices are as stable as Tara Reid's movie career and if anyone thinks that Bernanke is done with interest rates, well I want to know what their smoking.I could not have said it better myself!
They FOMC will reluctantly raise short term interest rates by another .25% in its June meeting because:Will this trio of bloggers actually be right? What do you think the Fed will do in June?1. It needs to tame inflation (especially asset inflation)
2. Defend a sliding dollar (its at ~1.2950 now)
3. Making sure money keeps flowing to fund US debtThese three reasons to raise rates will trump the 'cooling' economy.
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