Help Will Come From FED As Soon As They Find That Cut In Interest Will Be Appropriate With Consideration To Inflation

Category: Finance, Mortgages.

FED and Ben Bernanke have the last couple of weeks put an end to the speculations that a cut in interest was on the agenda in near future. The market is waiting to get some further guiding what move FED will do the next couple of meetings when it comes to interest.

The slowing growth in the US lead to expectations that FED would cut interest as soon as the inflation stays within the range for the FED inflation goal, this is not anything that anymore is expected to happen in near future. When the market get a clear view where FED is going with there interest policy both when it come to stockmarket direction and interest on mortgage loans. What the market is doing at this stage is adjusting to an environment where cut in interest is not anything that FED will be doing any time soon. The core area giving focus is inflation combined with growth, the inflation have been moving up some but there is at this stage expected strength in growth the next 6 month that been pushing interest higher which will have effect the interest on mortgage loans. This will when it comes to the stockmarket result in a period with uncertainty before the market adjusts to stronger growth and higher rates. Help will come from FED as soon as they find that cut in interest will be appropriate with consideration to inflation.

Interest will increase some further on because the strong growth, but as long inflation is not moving up rapidly the interest level will be historical low and this will keep rates on mortgage loans on historically low levels. FED have strong impact on the rates on mortgage loans and the key issue at this point is if FED consider that the early economic numbers indicating stronger growth is correct and what impact that will have on inflation further on. Mentioned when it comes to expected increase on US interest on mortgage loans is that this far the strong global economic growth has so far not been pushing inflation higher in any moves that in this stage is negative for growth or input for FED to increase the interest more aggressively than is expected at the moment. ECB is also increasing interest for the Euro region and have recently hit 4% and expect to be 4, 50% in the end of 2007, The increase in the Euro interest is also on the background of stronger growth than expected. This fact might ease the move on interest on mortgage loans further on which speaks for keeping away from getting fixed interest on new or existing mortgage loans. The conundrum that Alan Greenspan often related to when he mentioned the fact that the 10 year B- note did not move though the growth was strengthening seems to come to an end and a historical more familiar stage that Alan Greenspan expected to appear much sooner considering the strong global economic growth. Other aspects to effect interest level is the strong job less recovery that globally been a theme for the last 6 month and the shortage of adequate employees will effect wages and in the next step inflation and the interest level.