Sunday, June 03, 2007

Fed Will Make No Changes in Interest Rates

Inflationary pressures softened as the overall index for the Mid-America region declined, according to the May Business Conditions survey of supply managers and business leaders in the nine-state region that we survey each month at Creighton University.

The overall Business Conditions Index declined in May to 58.3 from April’s 62.0 as higher gasoline and energy prices contributed to the downturn in the overall index. However, the index, a leading economic indicator, points to healthy growth in the months ahead for the region.
The prices-paid index, which tracks the cost of raw materials and supplies, declined for the first time since February of this year. The May reading of 78.9, though down from April’s 81.7, continues to indicate significant inflationary pressures at the wholesale level. Based on our survey and other government data, I do not expect the Federal Reserve to move on interest rates at its next meeting June 27-28. It is clear that inflationary pressures remain too high for a rate cut but economic weakness generated by the downturn in housing will prevent a rate hike.

So if you are betting on a change in prime interest rates any time soon, you are going to lose that wager.

Ernie Goss

No comments: