Whats the chance of the Fed lowering rates next year, is this likely, would it suggest that recent rate hikes are a bit shortsighted?
I posted my concern on the Bernanke thread. "Unfortunately there is an inbuilt tendency with setting the interest rate, both here and abroad, to keep taking rates higher for longer than is helpful and to start reductions later than is helpful over the bull/bear economic cycles. While Greenspan still did a very good job my criticism is as applies generally to interest rate setting policy."
Less than 1%, inflation is moving up steadily, they have to walk a tight rope and be careful. Lowering could derail the market IMO, it would be so unexpected. Ben's job is as or more stressful then Bush's.
I keep stating this, but I feel there is an attempt to raise long term rates to allow for coverage of obligations by pensions/etc.. without bk's imploding the world financial system. I guess that the FED/Treasury is looking for a long term rate of 8% by 2010 if they can get there, but I don't think that will be a hard or fast target. Also think that above 7% yield on the LB a lot of people would be happy. I think they will hike a minimum of 50bps, and I like the idea of a 50bp hike followed by a pause. Should shake things up for the mid term elections, and allow longer term rates to rise a bit to take out the inversion. Short term rates hit 5.50, 30 yr goes up to 5.35 or so, curve inverts, recession hits, and six to nine months from now we start getting a series of about 4 25 bp drops, maybe a little more if conditions warrant. That un-inverts the curve, with the long rates maybe a little higher, maybe a little lower, but certainly above 5.00. Then, a slow series of hikes happens again, dragging up the long end of the curve with it as things stay fairly flat. Rinse and Repeat.