Fed meeting speculation

Ashley Milne-Tyte Jun 29, 2006


MARK AUSTIN THOMAS: Well today is the day that the Federal Reserve meets. Everyone expects them to hike interest rates again, but Ashley Milne-Tyte says no one seems to agree on when the hikes will stop.

ASHLEY MILNE-TYTE: A quarter percent hike today, another one in August. That’s the prediction of David Wyss, chief economist at Standard and Poors. He says inflation may have reared its head, but the Fed’s being over-zealous.

DAVID WYSS:“It looks to me like the Fed is making the normal mistake the Fed makes, which is that in these tightening moves they always tend to over-tighten. They move too long, too far, and then have to reverse course. “

He thinks the central bank will start cutting rates next year, depending on the economic data. But Global Insights chief economist Nariman Behravesh disagrees.

NARIMAN BEHRAVESH:“When you put it all together, I think the Fed’s concerns about credibility, the fact that inflation’s creeping up and the economy, while it’s slowing is not slowing that much, my view is that when in doubt, the Fed’s gonna tighten.”

Behravesh says the central bank will continue to worry more about inflation than weak economic growth. He predicts it will keep hiking rates perhaps to as much as six percent.

In New York, I’m Ashley Milne-Tyte for Marketplace.

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