The Fed – 12 to 18 months……
by Tom on December 8, 2009
in Mortgage Rates
Last week, we had the report from Goldman that said that rates will stay where they are until late 2011 or early 2012. Today, we get Morgan Stanley saying that the Fed will raise rates in the later half of next year.
I’m going to continue with what I’ve said before. We are, in my opinion, 12 to 18 months from being in a situation where the Fed needs and is actually able to do anything with interest rates. There is simply too much slack in the system and too many “precarious” situations that anything beyond a token (.25 to .5) would be called for.
But I have to admit, I’ve been saying 12 to 18 months for at least 6 months now and the time frame keeps pushing on the longer it takes until we see signs of pulling out of this mess. I was using the analogy the other day that says that we’ve stepped away from the edge of the cliff but we’ve got about 3 miles of swamp land to trudge through before we come out of it. The longer it takes to tromp through the swamp, the farther out until the Fed starts cranking up rates.
More later,
Tom Vanderwell
Calculated Risk: Morgan Stanley: Fed to Raise Rates in 2nd Half of 2010
In a research note titled: “The Fed Will Exit in 2010″, Morgan Stanley’s Richard Berner and David Greenlaw forecast that the Fed will raise the Fed Funds rate in the 2nd half of 2010 to 1.5%.They are forecasting GDP to increase 2.8% in both 2010 and 2011, and for unemployment to peak in Q1 2010 at 10.3%, and decline to 9.5% in 2011.
