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Interest Rates Staying in Place

Jun 23 2010

Interest Rates Staying in Place

The Federal Reserve finished a two day meeting and left interest rates in place instead of adjusting them upward to ward off possible inflation. The Fed board seemed to be more concerned about growth in the US than they had previously been when reporting their findings last month. European debt issues have stalled the US recovery to some degree and inflation is not a concern of the Fed at this time.

Remaining positive the Federal Reserve pointed to job growth and economic activity as progressing. The reaction by the markets was muted and a normal spike in one direction or another did not occur as the results of the meeting were released today. Treasury Notes saw increased demand as a safe spot to place investment dollars, as the yield moved lower on 10 year denominations.

The lending rate between banks remains at zero to .25% as it has been since December of 2008. This record low interest rate has helped to keep the economy from entering an extended recession and provided some of the footing for the recent gains in employment and economic activity sited by the Fed. Without the European debt crisis these past few months, there might have been interest in raising rates this year. Now it appears that rates will stay put until next year and possibly beyond.

Earlier in the day today New Home Sales were reported and greatly disappointed investors. The report was the worst in recorded history with much blame going to the lapse of the First Time Homeowners Credit. The Dow Jones Industrial Average finished the day up slightly at 10,298 while the S&P 500 and the Nasdaq both closed lower by less than a point. The technical indicators are still bearish with sell signals on all three indexes as demonstrated at ClearStation.com.

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