The Fed has lowered short-term interest rates this year, but longer-term bond yields have risen. This is confusing Wall Street. Alan Greenspan is acknowledging the fact that the 10-year U.S. Treasury and 30-year mortgages remained low even as the Fed jacked its key short-term federal funds rate from 1% to 4.5%. Overall, bond yields rose more in one month when the Fed was cutting rates, than during two years when the Fed boosted rates. Some people are now believing that this could prevent or slow down an economic "recession".
Basically, no one knows what is going to happen in the rates over the next month. There is suspicion that the widening gaps between short and long term loans, may help with incentives for banks to give long term loans. Though, others think that cuts in rates are just an overreaction that will result in inflation. I think that a cut in rates will help home buyers, but prices of houses also are a problem. Though, finding a low rate is key. I do not know too much on that subject, buy wouldn't they want a lower rate on short term loans, because they will get their money faster??
Monday, February 25, 2008
Subscribe to:
Post Comments (Atom)
1 comment:
Sounds like it's some reaction to the sub-prime glut last year, perhaps.
Right now, it's so much a buyer's market for houses, so I'm sure it's not to encourage/discourage housing starts or mortgage lending.
I'm going to hold off on your question on short-term loans and the going interest rates...in the hope that someone will try to figure it out and answer you. :) I'll be back. Next week.
Post a Comment