Thursday, June 29, 2006

The U.S. Rate Fate Today

Today's the day to watch out for the Fed's decision on interest rates. The final countdown has reached Day-0. We'll soon know whether the chicken comes first or the egg comes first. We'll find out if the Fed drives the market or the market(inflation) drives the Fed. This is of primary importance, at least to me, 'cos I'll get to know what interest rates or going to fall on my loans.

Analysts expect the Fed to raise the rates for the 17th time in a row. It is expected that Bernanke will raise the overnight federeal fund rates by a quarter percentage point to 5.25% , its highest level since March 2001, but there is also a lot of specuation about the potential for a half-point move.

Anyway, keep watch today. I'll update with the decision soon.

Updated: Analysts were bang on. As widely expected, central bank increased their short-term interest rates from 5% to 5.25%. "The extent and timing of any additional rate increases will depend on the evolution of the outlook for both inflation and economic growth - the Fed said in a statement earlier today.

It doesn't end there as feared, following the Fed decision, commercial banks raised their prime rates, a benchmark for many consumer and business loans, to 8.25% from 8%.



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