It’s amazing how fast interest rates are increasing. Less than two months ago, rates were one-quarter to one-half point (percentage point) lower than they are today. The yield on the ten year treasury note has increased from around 4.5% to 4.9%.
I would guess the main reason for the increase is the uncertainty surrounding inflation. In November of last year, many analysts were predicting the Federal Reserve Board would begin lowering the Federal Funds Rate in early 2007 (the rate at which banks lend to other banks). Based on current economic news it doesn’t appear this rate will decrease anytime soon.
The Federal Reserve Board has a scheduled meeting the last two days of January and hopefully some clear indicators on the economy and inflation will come from their statements. However, it’s often hard to interpret what they have to say.
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