Thursday, July 21, 2005

More Rate Hikes

Two items of note in this article...First.. is Greenspan possibly retiring or being asked to leave? The second is his reasoning for continued low mortgage rates. Seems like a very convoluted theory to me... maybe he just has no idea why long term rates don't go up. It would be a shame to see him continue to raise rates and trigger another recession as he did in 2000.
My thoughts...

Greenspan Says More Rate Hikes Coming

Federal Reserve Chairman Alan Greenspan, in what could be his final testimony before Congress, said that additional interest-rate hikes are necessary to control inflation and maintain strong economic growth.

Although Greenspan did not hint at the amount of the upcoming increases, analysts still expect the federal-funds rate to be driven up by a quarter-point at the policymakers' Aug. 9 and Sept. 20 meetings.

Greenspan also offered an explanation to the U.S. House of Representatives' Financial Services Committee about why long-term rates have remained low at a time when short-term rates are on the rise. This "conundrum" is a result of a global savings glut, a global investment shortfall, and investors sinking money into risky endeavors based on expectations of ongoing stability, he says.

Source: The Wall Street Journal (07/21/05); Ip, Greg

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