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The Fed is not likely to cut rates again this year.

 

The Fed is not likely to cut interest rates again this year as their attention is now turned to rising inflation.

The game of tug of war is officially on. The two opposing forces are inflation and the housing market. The overall U.S. economy has been quite resilient in 2008 and the economic stimulus package has proved successful in helping to drive spending back into the market. The big x-factor has been the rapid increase with oil prices.

The Fed is now stuck in a wait and see game to see where there next move lies. They are not likely to raise or lower the fed funds rate. The value of the dollar has continued to erode and foreclosed homes continue to pile up. The fed is likely to be holding out for the government to pass a relief package targeted towards spurring home buying and hope that oil prices settle heading into the fall. Taking a neutral stance towards the fed funds rate provides them the most flexibility to deal with inflation or housing at a future date if the market does not begin to correct itself. Mortgage rates have risen in the past few weeks but are not likely to head above seven percent any time soon.

6-21-2008 ? LoanNetwork.com

 

 

 

 

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