Wednesday, September 19, 2007

Predictions for US Interest Rates 2008

The Fed recently cut interest rates from 5.25% to 4.75% (sept 18th) The half percent cut took the markets by surprise because they had not been expecting such a large cut.

This also changes many predictions about the future of US interest rates. It suggests the Fed are now concerned about the state of the US economy, and in particular, the US housing market. This suggests they may be willing to cut interest rates further before the end of 2007 and 2008 could see a return to periods of low interest rates.

See: Why the Fed cut interest rates?

A lot will depend on how much this half percent cut in interest rate boosts confidence spending and prevents further falls in US housing prices. My feeling is that it will be insufficient. There will certainly be a time delay before the US housing market returns to steady house price growth.

Also see: problems in cutting interest rates further

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