Fed May Take "Breather" After Cut Next Week

Wall Street Journal's Greg Ip Says Fed May Take "Breather" After Cut Next Week

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Expectations for a pause in U.S. monetary policy were bolstered by an article in Thursday's Wall Street Journal, where noted Fed watcher Greg Ip said, "The Federal Reserve is likely to cut its short-term interest rate by a quarter of a percentage point next week -- but then may be ready for a breather."

However, the Journal article also points out that a pause in rate cuts would not necessarily signal the end of the financial turmoil in the U.S. economy. "It is almost certain to signal continued concern about economic growth and a willingness to cut rates further if the outlook worsens," Ip wrote.

Ip also said the Fed is concerned that further easing could aggravate rising inflation expectations as food and oil prices soar to new records. Concerns about inflationary pressures "means the option of standing pat will likely also be on the table," Ip wrote.

Fed fund futures imply a 90% chance of a 25bp cut with a 10% chance of no change. Looking further out, futures show a 19.8% chance of a second cut at the June 25 FOMC meeting, unchanged from a day earlier.

By Adam Button and edited by Nancy Girgis
©CEP News Ltd. 2008

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The FEDS need to put interest rate caps on all types of loan products. Lenders will never agree to lower interest rates until the FDS regulate the interest rates. For example the FEDS lend to Lenders @ 2% for Mortgage Loans. The lender that obtains these funds must comply with strick Mortgage Loan requirements. A cap of no more then 2% above the FED Rate would be fair on fixed rate mortgages and 2.5% on variable loans. No POINT FEES or Prepayment Penalties allowed on any mortgage loan. Since the FEDS will now lend for specified loan products. Citizens would automatically be protected under the new FED guidelines. If a Lender is found to have violated these strick lending requirements, several penalties and fines would be subjected to the lender. If the citizen has overpaid. The Lender would be required to reduce the laon amount plus pay all fees and pentals to correct the loan. If the Lender continues to violate these rules they would be disconinued from the program. NON PROFIT Credit Unions would be a great place to start. These Cedit Unions allready care about their clients and have experience lending under strick guidelines.

Above Posted By: Douglas M. Thomson Sr. | Fri, 25 Apr 2008 15:03:50 EST

Wall Street Journal's Greg Ip Says Fed May Take "Breather" After Cut Next Week

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