Friday, April 21, 2006

Prediction: Fed Interest Rates to 5.25% in June; End There

Despite the release of the minutes from the FOMC meeting, Bubble Meter is still predicting that the Federal Reserve will stop raising short term interest rates once it reaches 5.25 in June. The Fed may raise rates to 5.5%, although 5.25% is much more likely.

How high will the Federal Reserve raise interest rates this year? Why?

18 comments:

  1. after the 5.00 level the data will really start to turn negative due mainly to, you guessed it, the nasty situation in the real estate market. not only will the 'cash out refi machine' be shut down, but many real estate/mortgage/homebuilding jobs will be lost. double wammy of lower consumer spending and rising unemployment.

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  2. I think they raise one more time and they're done, short of something going horribly wrong in the crude oil market. Considering the way the real estate market is going, they may have to lower rates in 9-12 months to fight off a recession.

    BTW, I went past the "bubble bench" tonight (4/20) near the Dunn Loring metro outside of Washington DC. There were 45 lockboxes on the bench. One investor schmuck was showing a young (naive) couple around the building.

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  3. Yeah, I think that's what they want to do- raise a little more and stop.

    But if the dollar keeps going down, their hand may be forced.

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  4. NO WAY JOSE...IT WIll BE AT LEAST 6.

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  5. My mom told me last night she spoke with her advisor at UBS Financial, whom I respect, and he told her they had a meeting yesterday, which came away iwth a consensus that the Fed would reaise at the May and June meeting, and then be forced to CUT rates in the fall, around Sept. or Oct. This is what the gurus at UBS think is likely to happen. What could hteir possible reasoning be for that? If $4 gas (v. likely if we have a hurricane) slows down the economy that much, how will the Fed deal with that but contain still inflation? IMHO, this would exclusivley be to prop up the HB.

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  6. nikki, all those self proclaimed gurus don't know zilch...even fed doesn't know where they will stop..
    lots of people just form their opinion based on reported remarks of few "expert"..
    market is much complicated that then...i will not be surprised if we are headed towards 6.

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  7. I hope you're right...while I know not to put much stock in any "guru's" opinion, it just blows my mind that that situation is even being spoken of by reputable finanical institutions.

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  8. A falling dollar combined with huge federal deficits will force the Fed's hand. 6%, at least.

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  9. "A falling dollar combined with huge federal deficits will force the Fed's hand. 6%, at least."

    US rates are much higher then then Eurozone or Japan.

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  10. 5.25% in june. By then consumer rates will be carrying a larger risk premium so it won't be necessary to go higher and still get the consumer dampening they seek.

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  11. Don't discount psychology.

    When is a 25bp move not a 25bp move?

    When that move pushes passed a psychological barrier.

    A move to 5.0% carries weight, a move to 5.25% is a bombshell.

    I don't know why people are so obsessed with whole numbers. Moving to 5% implies a stop at 5%, moving to 5.25% implies that the next stop is 6%.

    grim

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  12. Dollar is falling, and commodities on the rise. I don't see how the fed can claim to stop raising the rate.

    IMHO the worst thing they could do is pause and then raise the rate in 6 months. This will cause even more speculation and housing costs will continue upward leading only to a more drastic crash.

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  13. I predict that their rate will stop for a long while. It will idle at 5-5.25 unitl the interest on 10year treasuries really takes off and it is OBVIOUS to even those on Wall Street that the inflation genie is out of the bag and the Fed is WAY behind the curve.

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  14. I now think it will go to 5.75%, maybe 6.0%. There is always some bad news out there, waiting to be announced, that will give the Fed the requisite justification for raising the rate. Even if they've excluded gasoline from their formula, it doesn't mean they don't comprehend its impact on prices in general. The exclusion is used to reduce COLA increases, but the effects of such cost increases will be taken into account nonetheless. It just won't be publicized.

    Believe what you see, not what they tell you.

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  15. look at commodity prices , copper@all time highs zinc,alu,moly,urainium,gold ,silver, you name it, its going up. why you may ask , the simple reason is inflation of the money supply these things dont increase on their own they need a catalyst and that is the fiat money system. its boom then bust that is the secret they inflate away to rob you of your earnings, a hidden tax.Then those in the know move assets out of deflating areas and get into appreciating assets. look at the dollar in your pocket, what is it made of--paper!! thats what its worth it is not a store of wealth it is a deflating asset. so if the fed does not what the whole house of cards tumbling down they HAVE TO RAISE RATES UNTILL THERE IS NO DEMAND----THAT MEANS BUST!!!!!!!!!!!
    Peace be with you all

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  16. short term rates only matter if the fed still controls procss, long rates are much more important and te fed doesn't control these. My guess is Fed will try to stop at 5.5%, but log rates (10 year) will go to 7.0% because inflation will stay high and foreigners are raising rates too. That puts mortgages at 9% and a major bust...inflation tops 5% in late 2007 and the interest rate hikes begin again till short term rates hit 9% by 08....just a thought!

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  17. Awaiting Bubble RubbleApril 23, 2006 12:50 AM

    My guess is 5.25% in June and then an attempt to pause. This will cause a big rally on Wall St, but it will be short lived as inflation data will start to appear (even in the hokey measures the fed uses) by Sept and the tightening will resume. The consumer credit driven economy will falter by the end of 2006.

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