It appears a Fed Rate Cut may be back on the table….
by Tom Vanderwell on July 10, 2007
in Uncategorized
U.S. Rebound May Be Bumpier Than Fed Expects as Credit Tightens
With what started out as a financing squeeze in the subprime-mortgage market now threatening other parts of the economy, it may be a struggle to achieve the 2.5% to 3% growth rate that most forecasters inside and outside of the Federal Reserve have penciled in for the second half of the year. Borrowing costs for companies are climbing as banks and investors demand more for their money and consumers are feeling the pinch from rising interest rates and sagging house prices. “We’re just starting round two,†says Andy Laperriere, managing director at International Strategy and Investment Group in Washington, which, along with others, sees growth for the period at below 2%. Laperriere, who was among the first to highlight the economic impact of tougher home-loan terms, says that, “Tighter credit appears to be spreading beyond the mortgage market.†“The market is overlooking the slowing effect†of higher borrowing costs, says Alan Blinder, a former Fed vice chairman who is now a professor at Princeton University. He says policy makers may have to cut rates this year to keep the expansion on track. Most economists expect no change in rates this year. (www.bloomberg.com) Bloomberg.com (7/8/07); Rich Miller
