Monday, August 07, 2006

Interest Rates - Will They Go Higher?

The Federal Reserve's Open Market Committee meets on Tuesday and one of the topics of discussion will be its next move on interest rates. The last 17 meetings have resulted in increases in the fed funds rate to its current 5.25 percent. As a result, commercial banks have raised the prime rate to 8.25 percent.

The prime rate effects many types of commercial lending including bank loans, SBA loans, leasing, factoring and real estate mortgages - specifically variable rate loans. Businesses that depend on these loans could be paying higher interest costs if the Fed can't resist one more increase in attempt to keep the lid on inflation.

The financial markets seem to be betting that the Fed will take a breather. What do you think?

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