Financial Turbulance May Delay Interest Rate Hikes

Markets were gearing up for some type of interest rate hike later in the year in response to inflation pressure. The latest financial sector problems may have put those hikes on hold.

Bloomberg reports that it's going to be hard for Bernanke to raise rates in the near-term future as the financial sector fights for its life:

"`The Fed's message that substantial downside risks have diminished now just seems completely ill-timed,'''said Brian Sack, senior economist at Macroeconomic Advisers LLC. `It is hard to see them tightening anytime this year.'''

Momentum for  a rate cut seems to be declining:

"Traders, who last month foresaw an interest-rate increase as soon as August, now anticipate the Fed will hold off until October, with the chance of a move by year-end dropping to 67 percent from 100 percent, futures contracts show."

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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