Tuesday, December 12, 2006
Fed is still inflation wary
Fed is still inflation wary
The Fed again chose to keep interest rates at the same rate of 5.25% on fears of high inflation and the costs associated. Investors weren’t thrilled with the news and sent the Dow Jones down 10 points.
The federal reserve is at a crucial point that can make or break the markets. We’re teetering at a top and the only thing keeping the markets up is increased amounts in the stock market. If the fed keeps rates the same next month, I think we will see lessened activity in the markets and the dow will lose a few hundred points.
Low interest rates allow institutions and the public alike to borrow money for investment and to expand business at lower costs. High rates cause the economy to slow because less money is borrowed at higher rates. Higher interest rates take more out of circulation. I think the fed will lower rates either .1 or .25% next meeting in order to keep the market at its current highs. Failure to do so will cause a 2-3% drop in the overall markets.