Bond Outlook [by bridport & cie, June 29th 2005]
Two views are currently to be found about the future moves of the Fed on interest rates: |
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- The one says that the US economy is slowing, inflation under control, the low long-term yields point to a risk of recession, and the Fed will therefore stop further hikes after lifting the overnight rate to 3¼% or 3½%
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- The other says that the Fed has announced a wish to return to a “normal” rate of 1% to 1½% above inflation, and that low long-term rates are all the more reason to raise the short end to curtail not so much general inflation but the housing bubble and its related spending spree.
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