Thursday, June 28, 2007

Federal Funds Rate Remains Unchanged

The good news for home shoppers is the federal funds rate remains unchanged after this afternoon's statement. But everyone who watches financial news day to day knows that lenders, analysts and others who affect the performance of the bond and stock markets don't only care what the Federal Reserve says -- they also care very much how it's said.

Sure, the Fed said that core inflation has "improved modestly," but did anyone's eye-brow twitch when it was said? Can you tell who's perspiring? And what do you suppose "modestly" actually means?

Well -- maybe the discussions don't happen quite like that, but certainly the business of making economic predictions is not an exact science.

This time around no one responded much at all, and both the stock and bond markets closed relatively flat. Long-term lending rates don't seem to be recovering, however, from the recent sharp increases. When inflation fears recently led central banks in New Zealand and Europe to suddenly increase their short-term interest rates, the repercussions were immediate. Interest rates soared around the globe -- and especially in the U.S, as investors put their bond money overseas.

But 6.625% for a 30 year fixed loan is still pretty good, and it seems relatively stable -- for tonight anyway.

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