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Interest Rate Concern

22 January 2007 - Features - Editor

After their last meeting in December, at which the US Federal Reserve voted to keep rates at 5.25 %, Fed has let the cat out the bag, by insinuating that there could be a rise in interest rates, in order to keep inflation at a respectable rate. It had been the fourth time that the interest rate was voted to remain at 5.25%. Inflation is not the only concern that the US Federal Reserve has, as they referred to the housing market and the concern of the declining movement within this sector. Analyst have speculated that the US Federal Reserve might be waiting to ensure that they have a clear vision of the US economy and can confidently anticipate any inflation risks that might appear in the future.

The minutes of the meeting indicated that certain members thought that the downside risks to the economic growth was increasing and was more broadly based then they had previously anticipated. All of the members, however, did agree that the predominant concern was that inflation would not moderate.

The meeting also reflected that including inflation concerns, the economy was indicating various conflicting information, which makes adjusting the rates in either of the directions a possibility. Together with their rates decision of last month, the US Federal Reserve released a statement that they had left room for any further increases, in order to keep inflation in check, if it was needed at any time.

The information collected by the US Federal Reserve has shown that activity in the manufacturing sector has remained less than in the previous years, that the previously active housing market sector has slowed down remarkably, and that there is still a great concern in the consumer spending sector, even though the end of the year had seen a little increase in spending.

The minutes of the US Federal Reserve, have also indicated that after eighteen rises, which were successive, that all the members of the US Federal Reserve Committee with the exception of one member, voted for the rates to remain the same for the fourth time.

 


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