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NEWS: Federal Reserve Raise Interest Rates the First Time in 4 Years

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posted on Jun, 30 2004 @ 01:57 PM
The Federal Reserve decided today to raise short-term interest rates for the first time in 4 years, from 1% to 1.25%. The last time rates were raised was on May 16, 2000 by .5%. These rates will be a serious that are expected to raise interest rates to 2% by the end of the year. Long-term rates have been raising steadily as well, from 3.1% to 4.61% within the last year. These rates were expected to increase as a result of the strengthening economic recovery.


In a year, said UBS Financial Services Economist Maury Harris, look for the rate to hit 3% and possibly 4%.

Today's move marked the end of Fed moves to generate a recovery from the economic downturn caused by of the technology bust of 2000 and the Sept. 11, 2001 terror attacks. From January 2001 until June 2003, the Fed cut its fed funds rates 13 times all the way down to 1%, the lowest since 1958.

The consumer has “been living on steroids' because of tax cuts and cheap financing, Gramley said. But as rates increase and consumers face a de-facto energy tax, how much they can keep spending to drive the economy becomes questionable, he said.

Please visit the link provided for the complete story.

Will the market continue to grow despite the rate increase? The consumers will decide. Credit card rates, and home loan payments are expected to increase. While the initial cost may not be that great, the subsequent rates may prove a problem for many consumers. As well, we will probably see home-buying decrease. One analyst predicts that rates will be at 3 or 4% by this time next year. Ultimately, those who save their money will benefit (money-market, savings account). Do you think this is the start of another downfall in the economy, or do you think the economy will continue to grow throughout this rate hike and the ones following? Will the bubble pop?

More Sources:
Profit Off The Street's Hopes and Fears
Market Reaction
Guide for Consumers
Hikes Might Be Good For Stocks

[edit on 30-6-2004 by Banshee]

posted on Jun, 30 2004 @ 02:02 PM
I expected the value of the US dollar to rise after the decision but so far, it's making no gains.

posted on Jun, 30 2004 @ 02:35 PM
The dollar is falling....


"Pretty much as expected. They kept 'measured'. They've also introduced a conditional phrase: 'nonetheless they will respond to economic developments as needed'. So that gives the Fed leeway to increase the pace of tightening moving forward. I expect the dollar to weaken off from here," said Shaun Osborne, chief currency strategist at Scotia Capital in Toronto.

Stocks are still rising though. Not sure how far the dollar will weaken.

[edit on 30-6-2004 by Jamuhn]


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