Tuesday, August 08, 2006

Today's Markets

All eyes are on the Fed today. 17 straight interest rate hikes of 25bps has brought interest rates to their current level of 25bps. The consensus seems to be that the Fed will pause raising rates, given that GDP growth has slowed recently. This signals that the interest rate hikes may have completed their job and that future hikes could further impede growth. Inflation will always be a worry and could justify further rate increases today, but the consensus among analysts and the media seems to be that rates will stay where they are today. The announcement will come later today. You can expect the market to react not only to the decision to raise or not to raise, but rather to the outlook given in the Fed's minutes. Traders like to interpret Bernanke's groups sentiment to gauge what may happen in the future.

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