10-for-10

The Fed just raised interest rates for the 10th straight time. The fed funds rate is now up to 3.5%. It was 1% just last year. The central bank also restated its intention to increase rates at a “measured pace.”

According to a survey of economists, more rate increases are on the way.

The target for the benchmark overnight bank rate will climb to 4.25 percent by the end of next year’s first quarter, a quarter percentage point more than predictions last month, and reach 4.5 percent by June, according to a Bloomberg monthly survey of economists. The overnight rate is forecast to reach 4 percent by the end of this year, the survey showed.

Economists at Goldman Sachs Group Inc. said yesterday the target rate may rise to 5 percent by the middle of next year.

The world’s largest economy will grow at a 4.1 percent annual rate this quarter, the most since the first three months of 2004 and up from the 3.5 percent estimated last month, based on the median forecast in the monthly survey. Growth for October through December is predicted to reach a 3.5 percent pace, up from last month’s prediction of 3.4 percent.

The other good news is that oil finally backed off some today. It reached an all-time of $64.27 a barrel. There are still worries about oil supply, but few traders seem interested in the fact that oil supplies are already above average.

U.S. oil inventories at 318 million barrels for the week ended July 29 are 7.3 percent higher than the five-year average, according to the Energy Department.

Domestic supplies of heating oil at 49.9 million barrels are up 4.9 percent from the five-year average, government figures show.

Long-dated bonds actually rallied this afternoon, and the major stock indexes are poised to closer higher for the first time in four sessions.

Posted by on August 9th, 2005 at 3:49 pm


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