Yesterday (August 7th), the Federal Reserve announced plans to keep the interest rate at 5.25%. In the wake of some turbulence on Wall Street, and growing storm clouds in the mortgage industry, their decision was somewhat surprising. After analysis of the somewhat cryptic message, the general consensus seems to be not to expect any cuts unless the Markets worsen considerably. That actually seems to be a real possibility, if you believe what some are saying (see Jim Cramer). The official statement from the Federal Reserve went like this: “Although the downside risks to growth have increased somewhat, the committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.” Even by the standards of the Federal Reserve, that’s pretty darn cryptic!
