Fed Raises Key Interest Rate to 5 Percent

Yahoo ^ | 05/10/06 | Martin Crutsinger, AP

[Moonman62]

The Fed will raise interest rates until they break something. But since 5 is a nice round number and they are so scientific, they probably will pause.

[dhs12345]

Hope they keep an eye on oil prices while they are raising the interest rate.

[HELLRAISER II]

I have 2 words for them, F***ing idiots! How is this suppose to help anything.

[Sabatier]

So here's a question for the armchair economists among us: "The Fed's rate hikes have raised the borrowing costs for millions of Americans on everything from adjustable rate home mortgages to auto loans." So the government determines this crucial aspect of the marketplace. In what sense is that free market capitolism at work?

[spikeytx86]

Wit the exception of food and energy prices have been practically stagnant. Why don't they f**king stop tinkering with the rate until you know prices actually start to go up!

[spikeytx86]

It's all smoke and mirrors. We have not been a free market since well 1900.

[Glenn]

Wit the exception of food and energy prices have been practically stagnant.

Housing - stagnant. Health care - stagnant. Education - stagnant. Insurance - stagnant. Taxes - stagnant.

Yeah. I understand what you mean.

[spikeytx86]

Housing market is cooling.

Taxes are not effected by interest rates talk to the J offs in Washington about that.

Interest Rates could go up to 50% and health care would still grow through the roof. Talk to third party payers and bureaucrats about that.

Education - See the J Offs about that too.

Insurance - Talk to mother nature about that.

[palmer]

Rates matter to borrowers but the real problem is the excessive increases in the money supply. Except for a brief interval in 1979-1980 and the 1988 housing bubble, the reserve requirements have been gutted from 34% in 1975 to about 5.5% today (http://www.federalreserve.gov/releases/h3/hist/h3hist5.txt) The world is drowning in money funneled into real estate and other assets. Gold broke $700 today.

[VeniVidiVici]

Bernanke, who succeeded the legendary Alan Greenspan as Fed chairman on Feb. 1, said a pause would give the central bank time to assess the impact that its long string of rate increases was having on the economy.

Well, that statement gives me warm fuzzies. "We're not sure what impact the rate hikes are having so we'll stop for awhile and see.".

[lilylangtree]

Guess that inflation rate announced by US Treasury in April in connection with the I bonds is greater than the 1% that Treasury adjusted for.

[familyop]

Rate hikes are a way to keep our US dollar high with respect to other currencies. After other currencies get higher in comparison to our dollar, you can bet on another US rate rise in reaction.

Our fattest political contributors will continue to be able to buy containers of imports for less and get more for less while vacationing in foreign countries. That way, they will be able to keep us up to date on European social politics and feel better about further disrespecting US social conservatives and letting Hillary get into office in 2008. Regardless of which party gets executive office, their daughters will remain in power here.

...see how it all works out?

[Sabatier]

This is starting to have that Seventies Flashback feeling, and I don't mean disco.

[Cousin Eddie]

Free market capitalism requires sound monetary policy and a sound currency, the latter of which implies low inflation. Fre market capitalism does not connote wild anarchy in business dealings.

And despite the claims that we haven't had a free market for 100 years, that's nonsense. If anyone wants to go out and start a business, who's stopping them? The entire job growth in this latest expansion has come from small business...households forming startups. That is free market.

[economist-student]

If I were a member of the FOMC, I would raise interest rates up to 20-25%. I think saving the US dollar is more important than "employment".

[JusticeForAll76]

The Fed is more concerned with what they think inflation will be in the near future.

There has been some evidence that real wages are starting to rise, an unemployment is in danger of getting too low.

[familyop]

"And despite the claims that we haven't had a free market for 100 years, that's nonsense. If anyone wants to go out and start a business, who's stopping them?"

...established businesses that don't want competition, with their zoning regulations, floods of prank calls, false accusations, slanders, dirty deals with environmentalists,...

[DoctorMichael]

In what sense is that free market capitolism at work?

Good question!

Its not. They are, in essence, rigging the free market capitalist system and affecting changes in it.

However, in a rational sence, they are controlling the Economy so as to smooth out the Highs and Lows (the Amplitude of the Waves).

[economist-student]

Losing the status as the world's reserve currency would be quite unfortunate.

I wish some relatively hawkish Fed Chairman (like Volcker) were in power instead of "Helicopter Commander" Bernanke.

[familyop]

Just recently in my area, a big, urban developer tried to get one of his radical environmentalist concubines/employees into office as a commissioner in a rural area outside of his city, so that she could run interference against small developments. Similar tactics of the past in the lumber industry led to the interesting situation we have in that market, too.