Click Here

REALTORŪ Magazine Online: The real estate professional's business support tool.

OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®

Daily Real Estate News  |  December 11, 2006  |   Inflation Will Decide Whether Fed Hikes Rates
The Federal Reserve is expected to leave target interest rates unchanged at its meeting on Tuesday, fueling hopes that it will start cutting rates some time next year.

However, there's uncertainty over when rates would be cut and by how much. Fed Chairman Ben Bernanke, who's been open about his plans for interest rates, hasn't talked about the kinds of rate cuts that many investors are banking on.

Futures traders had been betting that the Fed would start cutting rates at its March meeting, but high employment rates have caused them to extend that prediction to May.

By June, futures trading indicates, the market thinks the Fed will have cut rates at least once, maybe twice. But Bernanke said in a speech two weeks ago that the question facing the Fed isn't whether to cut rates, it is whether to raise them to fight inflation. After all, "core" inflation, not counting volatile food and energy prices, remains higher than the 2 percent a year that the Fed is willing to tolerate.

If inflation keeps moderating over the next few months and pulls back toward the 2 percent level, then the interest rate cuts may happen. But if inflation proves sticky and stops pulling back, the Fed could be forced to cool it off by raising rates.

"Inflation is the key here," says Ethan Harris, chief U.S. economist at Lehman Brothers. "If you get serious inflation, if the Fed's fears materialize, then you will have the Fed hiking instead of cutting."

Source: The Wall Street Journal, E.S. Browning (12/11/2006)

Browse all of today's news
E-mail this page to a friend
Give us feedback

Search news
Launch my search
 
Subscribe to news
Subscribe to News
Daily and weekly real estate news, trends, NAR press releases, convention coverage, plus exclusive features and columns.

RSS Feed
Get the Daily Real Estate News delivered straight to your desktop or news aggregator. (New to RSS? Learn the basics here.)
 
 
SHARE YOUR INSIGHTS
How did you sell it?
Tell us how you overcame hurdles to sell a challenging or very unique listing!