Interest rate guessing game is back

Bob Moon Oct 24, 2006
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Interest rate guessing game is back

Bob Moon Oct 24, 2006
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TEXT OF STORY

SCOTT JAGOW: For about a year and a half, every time the Federal Reserve met, we said the same thing: It’s a done deal, they’re gonna raise interest rates another quarter-point. And they did, 17 times in a row. But then this summer, the Fed finally stopped, and the finger’s been on pause button ever since. Today, the Fed governors meet again and everybody’s saying the same thing. Here’s Bob Moon:


BOB MOON: Fed-watchers generally believe the monetary policymakers will leave interest rates where they are once again and let the economy coast for a while.

But Commerce Bank chief economist Joel Naroff says what happens further down the road all depends.

JOEL NAROFF: “The Fed is trying something that we haven’t seen before.”

Naroff says normally the central bank has hit the brakes hard to control inflation, rather than just easing up on the gas as it did by raising interest rates gradually.

So it may not be clear for a few more months if that’s been just enough to break the momentum of higher prices.

In fact, when asked whether if interest rates will eventually be heading down or up, Naroff jokingly answered, “Yes.”

NAROFF:“While the expectation is that they won’t have to raise rates, we can’t assume that the economy does slow enough to ease inflation. There may be some issues about raising rates again.”

For the moment, though, Naroff and numerous other experts think the Fed is more likely to have to hit the economic accelerator before too long by lowering interest rates, perhaps by next spring.

In Los Angeles, I’m Bob Moon for Marketplace.

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