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Whispers of a rate hike

Bob Moon Jun 21, 2007


Bob Moon: Attention Wall Street: The interest rate policymakers are sending signals about what they’re going to do next.

Wall Street hates surprises. That’s why the Federal Reserve seems to be using the break-it-to-me-gently approach of leaking the news first.

It would appear that someone at the Federal Reserve has been talking to the Wall Street Journal about what the central bank is most worried about.

And you can translate this morning’s news this way: Don’t expect an interest rate cut anytime soon — and in fact, inflation pressure might well dictate a rate hike.

We don’t know exactly who has been talking to the Journal. In fact, you won’t find any attribution in its article beyond what Fed officials are “expected” to do. But it’s a generally accepted rule in official Washington: Those in-the-know talk on what they call “deep background,” as long as there’s no specific explanation of where the information comes from.

So this morning’s Journal puts it this way: Even though inflation is likely to soon drop close to the 1 or 2 percent comfort zone the Fed is understood to be looking for, the monetary leaders want to shift focus when they meet next week, and highlight what the Journal report calls “the more uncertain path of future inflation.”

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