Fed Hike No.11

Again we see economics at it's best, at least according to Alan Greenspan and the Federal Open Market Committee. Despite doubts of yet another interst rate hike, due to Hurricane Katrina, the FOMC today has again raised interest rates. The last time rates were this high was August 2001 . It is interesting to me the approach the Committee is taking by saying it will continue it's rate increases throughout the year. Inflation is the word of the day, month and entire year of 2005. Working for a new start-up bank in our growing community, I have sat in several meetings lately where interest rates are set according to the market, and it has been interesting to see the effect these types of changes have on the everyday consumer as well as businesses that are looking for investment opportunities as well as funding. Interestingly enough and obvious to most people is the fact that everyone would love to get an extra few basis points on there CD or Money Market account, but few want to see their mortgage rate or variable consumer loan rates, like credit cards increase. It must be said, you can't have your cake and eat it too. As the rates continue to increase I think it will become increasingly more difficult to satisfy the masses, consumers and businesses alike. At least oil prices decreased for a short period (while the fed was meeting of course). It's too bad the committee couldn't have stayed in session longer, or at least until I had filled my gas tank.


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Dr. Tufte said...

What a thoughtful and informative post!

The Fed seems to be sticking to its plan of steady and gradual increases in interest rates. This is a sign that in the big scheme of things, that Katrina isn't very important.