Wednesday, August 09, 2006

Interest Rate Non-Hike

The U.S. Federal Reserve left overnight interest rates unchanged at 5.25% after having pushed them up 17 times over the previous two years. Its aim is to set short-term interest rates that slow inflation without provoking a recession.

Noting that "some inflation risks remain," the central bank left itself room to resume raising rates if rising prices turned out to be more stubborn than it expected, though it implied that its hope was to avoid additional moves for the foreseeable future.

The bet is that conditions are right for a "soft landing" for the economy -- one of the most elusive goals in monetary policy.

The market indexes briefly rallied after the move, but quickly fell back because of concerns that the central bank might resume rate increases later.

Certainly the biggest concern the average Joe has is inflation. Inflation steals from your pock; wages rarely keep up. I have personally experienced this over the past few years. Despite all of the job growth, etc., I am not financially better off today than I was 5 years ago. I am however optimistic about the future, not because anything the government is or will do, but what I am doing.

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