Will the Fed provide more stimulus at the expense of the Dollar?
*Bloomberg, by Scott Lanman, February 13, 2008
“The Federal Reserve’s interest-rate cuts last month have failed to lower borrowing costs for many companies and households, increasing the chance of further reductions from the central bank.
Companies are paying more to borrow now than before the Fed reduced its benchmark rate by 1.25 percentage point over nine days in January, based on data compiled by Merrill Lynch & Co. Rates on so-called jumbo mortgages, those above $417,000, have increased in the past month, making it tougher to sell properties and risking further price declines.
`It’s the clogging up of the credit markets that worries me most,’ Harvard University economist Martin Feldstein said in an interview in New York. `The Fed has done a lot of cutting, the question is whether it’s going to get the traction that it did in the past.’
Banks and investors are demanding greater compensation for offering credit as losses mount on subprime-mortgage securities and concerns grow that ratings of bond insurers will be cut. Elevated borrowing costs mean Fed Chairman Ben S. Bernanke will have to reduce rates further to revive the economy, Fed watchers said.”
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