Wednesday, January 6, 2010

Interest Rate Policy: Outlook for 2010

Will interest rate remain the current level which is considered to be very low now? It is under pressure as Christine Birkner of FuturesMag.com had written in this article:

Christine Birkner (published 1/1/2010):
"Whether 2010 will be a year when the economic recovery begins to take root could depend on what happens in the Treasury complex and the outlook for interest rates. The global economic crisis kept interest rates frozen near zero throughout 2009. In a November speech before the Economic Club of New York, Federal Reserve Chairman Ben Bernanke reiterated the Fed’s stance that economic conditions would warrant low levels of the Fed funds rate “for an extended period.” The Fed’s actions likely will weigh on the dollar and the economy at large in 2010."
 
Analysts expect Treasury yields, which are relatively low, to climb a bit in 2010. “I can’t imagine [Treasury yields] moving much lower. Until the Federal Reserve implements policy action, these rates will be reflective of supply and demand for safe assets,” says Mike Kimbarovsky, principal, Advocate Asset Management. “[Three-month Libor] would be the first to react to any uncertainty or volatility [in the market]. It will maintain a low level until there’s uncertainty, and then it’ll spike.” 
For a full story of this article, click here.

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