The Fed's Wait and See Approach...
Posted May 1, 2008 10:09 a.m. EDT
So the fed did what we all thought they would do – lowering the Fed Funds Rate to 2% with the Consumer Prime Rate to follow down to 5% - with some positive reaction from the bond markets (we watch the 10 year treasury movement as an indicator of long term rate direction). Their message was fairly clear – “we think we’ve done enough for now so we’re going to digest things over the next couple of months”.
The Fed doesn’t meet again until June, so for now we’ll be watching quite a bit of economic data over the next six weeks or so. Things to look out for – how the economy is faring, unemployment, consumer confidence, housing starts, gas prices, etc.
And of course inflationary fears could be the other achilles heel – but from my perspective – I don’t think we’ve seen the last of the Fed cuts this year. Gas prices will continue to weigh on consumers and the economy – and that alone may be enough to continue to stall the full rebound of the US economy.
Jeremy M. Salemson
Corporate Investors Mortgage Group, Inc.