Interest rates

**alaskaguy** · 07-03-2008, 03:14 PM

Should the federal reserve be lowering interest rates to prop up the economy or raising rates to fight escalating inflation?

The European Central Bank today raised interest rates by a quarter-point to 4.25% in its first rate increase in a year as the central bank tries to rein in escalating inflation -- even amid signs of weakening economic growth.

**TykeClone** · 07-03-2008, 03:16 PM

They should be raising them to fight inflation.

Even without fed action lately, rates have been inching up a bit.

**cybsball20** · 07-03-2008, 03:18 PM

Might as well raise them...

**snowcraig2.0** · 07-03-2008, 03:21 PM

Raise them. Part of the problem with the economy is the Dollar is so weak.

**jdolson** · 07-03-2008, 04:04 PM

Since i am in the business of selling Italian equipment, raising rates would help me greatly! The conversion rate is a killer.

**snowcraig2.0** · 07-03-2008, 04:04 PM

Originally Posted by jdolson

Since i am in the business of selling Italian equipment, raising rates would help me greatly! The conversion rate is a killer.

Pizza makers?

**jdolson** · 07-03-2008, 04:09 PM

Ha!! Nope. Machinery to make concrete pipe, manholes and other precast structures. Nothing sexy like Ferrari!

**snowcraig2.0** · 07-03-2008, 04:11 PM

Originally Posted by jdolson

Ha!! Nope. Machinery to make concrete pipe, manholes and other precast structures. Nothing sexy like Ferrari!

I've laid more pipe in this town than Wabasha plumbing!

**CYdTracked** · 07-03-2008, 04:12 PM

We are in the middle of a foreclosure "crisis" and yet we lower rates so it is more affordable for people to take out loans and spend more money to boost the economy while going further into debt. The whole problem in the first place is there are a lot of people spending money on things they can't afford then don't take responsibility when the bill is due and they don't have a means to pay it. Just look at how reliant we are becoming on technology luxuries such as mobile data and media, HDTV, etc. I'd love to have HD and a plasma TV and all sorts of cool electronics but there are more important things I need that money for that I can live without all that for now.

I hate to say it but the average American is becoming wasteful with their finances which is partial blame for the state of the economy right now I believe. It's sad when debt collection is becoming a more important part of every day operations for a lot of businesses when not long ago sales was the big focus.

For me if I were looking to take out a loan to buy a home or something this would be a good time but I'm not in the market for any more loans right now and would rather the rates go back up so that my investment rates would go back up with them as well. Just in the past 8 months my money market savings rate went from 5.50% to 3.65% due to the drop in the federal rate. The only good thing the rate has done is dropped the adjustable rate on my 2nd line of credit on my house which dropped my monthly payments by about $60+ a month which I'm basically just using that difference to add to the additional principal I put down so I'm still paying the same as I usually do but just getting an extra $60 more in additional principal.

I don't like hearing people complain about this being hard time on finances when some of these people I hear from are the ones that went out and spent a bunch of money on something like a home theatre system not long ago. If money is that tight for you don't go spending a few grand on things your can live without else I don't want to hear your complaining about money.

**jdolson** · 07-03-2008, 04:16 PM

Originally Posted by snowcraig2.0

I've laid more pipe in this town than Wabasha plumbing!

Gustafson!!!!! You Schmuck!!!!

**Ms3r4ISU** · 07-03-2008, 05:23 PM

[quote=travman23;529422]For me if I were looking to take out a loan to buy a home or something this would be a good time

About six weeks ago, local mortgage rates hovered between 5.375 to 5.625. When I started seriously thinking about refinancing, the rates started rising steadily. Now, where I'm looking, 6.00 is low. The only good thing about this rate I can find is that a year from now it will be higher.

**LindenCy** · 07-03-2008, 06:46 PM

Originally Posted by travman23

I hate to say it but the average American is becoming wasteful with their finances which is partial blame for the state of the economy right now I believe. It's sad when debt collection is becoming a more important part of every day operations for a lot of businesses when not long ago sales was the big focus.

I don't like hearing people complain about this being hard time on finances when some of these people I hear from are the ones that went out and spent a bunch of money on something like a home theatre system not long ago. If money is that tight for you don't go spending a few grand on things your can live without else I don't want to hear your complaining about money.

I think you are pretty much on the money with these points.

**alaskaguy** · 07-03-2008, 06:51 PM

[quote=Ms3r4ISU;529459]

Originally Posted by travman23

For me if I were looking to take out a loan to buy a home or something this would be a good time

About six weeks ago, local mortgage rates hovered between 5.375 to 5.625. When I started seriously thinking about refinancing, the rates started rising steadily. Now, where I'm looking, 6.00 is low. The only good thing about this rate I can find is that a year from now it will be higher.

Not necessarily.

If the Federal Reserve increases the discount rate and pushes up the fed funds rate, I wouldn't be surprised to see longer term and fixed mortgage rates drop.

**ericlambi** · 07-03-2008, 07:34 PM

Originally Posted by alaskaguy

Should the federal reserve be lowering interest rates to prop up the economy or raising rates to fight escalating inflation?

The European Central Bank today raised interest rates by a quarter-point to 4.25% in its first rate increase in a year as the central bank tries to rein in escalating inflation -- even amid signs of weakening economic growth.

This is a tough call. M2 Growth in the US is currently right in line with its 3 year average at 6.2% (according to the data I just downloaded from the STL Fed anyway). With only 1% or worse real GDP growth, this is mildly inflationary. However, I have a tough time thinking that money growth will get out of hand as long as the credit crunch is in place, and therefore am not that concerned about long-term demand-pull inflation. So I say leave them. If monetary aggregates start growing too quickly then something will need to be done to nip that in the bud though.

The Euro zone could be headed for some tough times. Raising rates in this type of environment is certainly going to control long-run inflation, but at what cost? The Euro area doesn't really need any more headwinds to growth, the governments certainly create enough already.