Monday, January 29, 2007

Fed Likely to Hold Off on Rate Cuts

When Federal Reserve policymakers meet on Tuesday, economists predict that interest rates will be left alone, according to a survey by USA Today.

Economists previously thought the Fed would cut rates in early 2007. However, their tune is changing as recent data suggests the economy is faring better than was expected given the slowdown in housing.

The Fed has left interest rates unchanged since June 2006, after raising them 17 times over two years.

Most of the economists surveyed do not expect a change in interest rates until the fourth quarter, when they think a quarter-percentage-point cut is likely. But opinions vary.

For example, economists at The Conference Board and Bear Stearns predict rates will be higher at the end of the year than they are now.

Timothy Rogers, the chief economist for Briefing.com in South Natick, Mass., says it’s too close to call.

"It could go either way right now. Anyone who comes out and says he knows which way things are going is full of malarkey," he says.

Source: USA Today, Barbara Hagenbaugh and Barbara Hansen (01/29/2007)

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