Thursday, January 29, 2004
Fed hints, Bank to act
Posted by David Smith at 10:42 AM
Category: Thoughts and responses

The Federal Reserve moved, at its January 27 meeting, to a more neutral stance on monetary policy. It will be "patient" before raising rates but has clearly prepared the way for, say, a spring or summer move. All the attention in Britain has been on the surprisingly one-sided Hutton report. Even more surprising will be if the Bank of England doesn't raise rates from 3.75% to 4% at its February 4-5 meeting.



I'll be surprised if the Bank of England does act to increase interest rates. With the US Fed Funds rates at 1% and the ECB at 2% (I think), the prospect of a rise in the Bank of England's rate to 4% will only act to further the rise of the Pound against the dollar and slow economic growth. Are their signs of significant inflation in the English economy or super strong grow rates? I know you were surprised that the Bank of England didn't raise rates last time they meet but I've not read on this site your economic reasons for your position.

It's time to start railing at US fiscal policy. A case for deficit spending can be made when economies are in decline. Vast increases in the size and scope of government that seem to be in the cards in the US are now becoming unnecessary, irresponsible, and will do real damage to the economy in the coming years.

Posted by: Gary Bezowsky at January 30, 2004 05:32 PM