Wednesday, August 09, 2006

Fed Rate Pause - What's the Impact on Bank Loans?

So the Fed's Open Market Committee decided to take a breather in raising interest rates. Does that mean that bank borrowing rates will stabilize, increase or decrease?

According to today's Wall Street Journal (you'll need a subscription) column "Tracking the Numbers", the Fed rate pause may not help banks. For those banks who have been paying higher and higher rates to obtain deposits, the hiatus in the Fed's interest rate boosts doesn't provide an opportunity to reprice some of its loans. Classic case of increasing costs and flat revenues - not a good thing for the bank's bottom line.

What about your bottom line as a borrower? You can relax until September 20th.

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