Currently, they stand at 4.50% and are almost certainly going to be raised to 4.75% at next week's Federal Open Market Committee March meeting.
How high will interest rate go on the Fed Funds during this year?
Please post your predictions and why!
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My 2006 Fed Rate Prediction:
ReplyDeleteBen will take us up to 5%--in a futile attempt to prove that he's an inflation fighter, but primarialy to keep up foreign support for the USD. He will then pause at 5% for a bit to reassess.
When it becomes clear to him that the housing market is done--when it begins to drag on the economy, he'll probably signal his intentions to lower rates again. This will cause the USD major problems and will also cause long-term rates to shoot upward.
He's in a pickle and knows it. Regardless of his actions, we are all in big trouble...
Raise rates--kill housing market
Lower rates--kill the dollar
Better start warming up those Helicopters.
The current odds on www.intrade.com give a 79% chance that rates will be on or over 5.00% at the end of 2006. They actually don't have any contracts on ranges higher than that and 79% is pretty high, so I wouldn't be surprised to see 5.25% or even 5.5%.
ReplyDeleteBen's between a rock and a hard place. Which way will he go.
ReplyDeleteI think he's going to have to keep foreign investors paid and interested..so at least 5%.
Simmssays…
AmericanInventorSpot.com
6% by yr end...and rising more next yr.
ReplyDelete6%? No way. That along with all the other economic problems will crush the economy. 5.5% max.
ReplyDeletedavid..many said 4-4.5 and no more last yr including wannabe prescient pimco chief..i think the lag os hyper inflated oil+commodities will trickle in slowly slowly..that's the problema...mucho problema para bernanke.
ReplyDeleteanon,
ReplyDeletefair point. :-)
does anyone out there have any first-hand knowledge of how the March sales are looking so far? I've picked up some buzz off the web that the March numbers look dismal, but I'd like to hear some confirmation of that.
ReplyDeleteall of the above is simply conjecture. The Fed has said more rate hikes will be "data dependant". Thus with jobless claims remaining in the 300k range, the ISM survey rising, and avg earnings rising, the fed will keep hiking. These 3 piece of data must turn before the fed stops. They haven't turned yet so 5% is defintely in the cards...
ReplyDeleteI also believe 6% by the end of 2006. Unfortunately, we need to keep raising interest to keep foreign investors buying our debt -- and now Europe and Japan are starting to raise their interest rates so we are going to have to keep ahead of them. 5% is going to happen for certain.
ReplyDeleteI agree with 6%. Bernanke, soon to be known by the initials BK, will have no choice since rates are going up all over the world.
ReplyDeleteHe will take it up to 5.0-5.25%, then hold for the election, and resume to 5.5% by the end of the year.
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