Which Way Next for Short-Term Interest Rates?

All the talk earlier this year about the Federal Reserve raising interest rates in the second half has proven to be just that - talk - and a few lone voices are now being heard predicting the next move to be down, not up. If the current economic slowdown is anything like the last one, rates will move down further before it's over.

With energy prices now plunging, before you know it we may even have another "deflation" scare to make the current economic slowdown even more interesting, in which case, slashing rates to zero sometime in the next year or two could be a real possibility.

Two years into the slowdown last time around, as rates were about to be reduced from 1.25 percent to an even 1.0, home prices were rising at 6-8-10 percent a year making the "deflation" claim laughable in retrospect.

This time, it may be the real thing.

Comments

[pjanoski@rc...:]

Basically, what you seem to be saying is that those who have dilligently followed a plan of saving and investing in various pension plans are now being required to bail out those who didn't.

One result seems to me to be the accumulation of most of Americas wealth into the hands of the wealthy.

Paul

2008 Aug 12 08:25 PM