Tuesday, May 26, 2009

Short Term Rates Are Not Going Up aAnytime Soon

From Bloomberg:
Fed Funds Rate May Be Near Zero for Years, Fed Researcher Says
The U.S. main interest rate may need to stay near zero for several years given the recession’s depth and forecasts that unemployment will reach 9 percent or higher, said a researcher at the Federal Reserve Bank of San Francisco.
I agree because I believe economic recovery will be so weak that raising those rates will be very politically unpalatable. This should cause a steepening of the curve even from these levels and very good profits for solvent banks. ( read small banks)

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