Interest Rates Remain Steady

[May 21, 2007.]

 

The Federal Reserve has indicated it will not be cutting interest rates in the near future. This, despite the fact there are signals that the U.S. economy is growing at a snail's pace.

The federal funds rate on overnight loans between financial institutions is holding steady at 5.25 percent. That means that the rate has been unchanged since nearly a year ago. Federal policy experts say that the inflation threat remains real and is, in fact, a more pressing concern than sluggish economic growth.

As a result, the Federal Reserve will not be cutting interest rates before August—and it may decline to do it then. That's because the Fed chairman believes that the economy will rebound soon and that inflation will stall. In June, the Fed could decide that it's equally concerned with inflation and growth, but no interest rate change is expected at that time.

The Fed's cautious approach should not be surprising, given the mixed signals that are being sent as far as the U.S. economy is concerned. While Fed officials obviously hope for a turnaround, they are realistic enough to realize that bad economic news could be just around the corner.

Meanwhile, Fed officials are keeping a close eye on unemployment, since the job market appears to be soft. Interest continues to remain high regarding consumer prices and inflation data. Obviously, state and local officials are also deeply concerned about the economic figures and what they might mean for tax revenue.

While national security remains a top issue for many voters, it is possible that economic concerns could emerge as an issue as the 2008 Presidential campaign heats up. A sudden and precipitous economic downturn could change the shape of the Presidential race, giving impetus to candidates who are well-versed on economic issues, but perhaps less experienced when it comes to national security concerns.

Julie Ann Amos
May 21st 2007

More Information:

• How To Tell When It Is A Good Time To Refinance
  With the economy fluctuating as much as it is today, every now and them it produces a time when it is a good idea to refinance your mortgage. You have heard of others making that change, and may have heard that some got a much better deal. Mortgages are different though, and so are people's circumstances.