Saturday, August 14, 2004

Economy poised for slowdown

But Fed's moving swiftly toward a neutral funds rate

The Fed tightened another .25 percent, and mortgage rates are unchanged in the high fives. Ten-year T-notes, the market driver, have actually improved, down to 4.22 percent. Thus far, the Fed's cumulative action has added .5 percent to the cost of America's home equity lines of credit, but no one seems to mind.

The rate hike was expected, but many were surprised by the stubbornness of the Fed's post-meeting statement. "The Committee believes that, even after this action, the stance of monetary policy remains accommodativeThe economyappears poised to resume a stronger pace of expansion going forward." Might a slowing economy cause the Fed to suspend its march to a neutral Fed funds rate, somewhere north of 2.5 percent? No chance.

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1 comment:

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