Fed says interest hikes may be necessary

[swag]

http://seattlepi.nwsource.com/business/apbiz_story.asp?category=1310&slug=Fed%20Minutes

By JEANNINE AVERSA
ASSOCIATED PRESS WRITER

WASHINGTON -- Federal Reserve policy-makers suggested that "significant" increases in short-term interest rates probably would be needed to keep inflation from becoming a problem, according to minutes released Thursday of their August meeting.

Federal Reserve Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee - the group that sets interest rate policy in the United States - unanimously agreed at the Aug. 10 meeting to boost a key short-term interest rate by one-quarter percentage point to 1.5 percent.

"Given the current quite low level of short-term rates, especially when judged against the recent level of inflation, members noted that significant cumulative policy tightening likely would be needed to foster conditions consistent with the committee's objectives for price stability and sustainable economic growth," the minutes said. It didn't elaborate on what "significant" meant.

The news came as a surprise to many bond traders, who had been betting since the last Fed meeting that the pace of rate increases might slow. The price of the 10-year note fell Thursday, pushing up its yield back above 4 percent after falling earlier in the day to 3.96 percent.

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[swag]

1. Weird scenes inside the money mine,

and yes, I can say, "stagflation."

[The_Casual_Observer]

2. And they said that the price of oil didn't matter anymore

They are going to raise these rates big time in the next few months, to try and keep up with inflation. They have only been holding back because of the chimpco election. If you haven't cleared out your stock holdings don't wait too much longer.

[mtnester]

3. One of the first on the chopping block...

Alan Greenspan - you're fired

Hah...that would be great for him to become a statistic in his recovering economy delusion...bushbot

[Robbien]

4. Again I am going to say Fannie Mae

They are trying to compensate for the Fannie trouble heading this way.

[ozone_man]

6. How does raising rates help Fannie Mae?

I would think raising rates would make for more defaults, making things worse for FM.

Listening to the radio tonight, the economists were remarking that higher oil prices ($49/barrel) would likely have the effect of limiting consumer spending. I was waiting for the bubbleheads to say this and finally one did (at least the one I was listening to). We may be heading into deflation not inflation, and not principally due to oil. The consumer's wallet is maxed out period. The wave of refinancing, tax prebates (who thought that up?), Iraq war military boost, etc., is done. The party is over, time to pay the piper.

If inflation was a threat, gold would be taking off and it hasn't been. Otoh It's getting ready to tank.

I suspect that the FED has to raise rates to keep our creditors on the hook. These are just my guesses.

[AndyTiedye]

7. They Curb Inflation By Throwing People Out of Work

that has always been the Republican way. With oil prices heading skyward,
we're going to have inflation anyway, along with continued recession.
Everything's going up except wages.

Interest rates will go up, way up, so the government can borrow
the trillions of dollars they have spent, and are continuing to
spend on the Crusade.

[Demobrat]

5. This is good news for seniors

who live on interest income and others who would like to earn more than 1.25% on their savings.