Monday, June 05, 2006

Bernanke suggests interest rates will rise

Bloomberg reports that US Treasuries declined after Federal Reserve Chairman Ben Bernanke signalled the Fed would not pause its interest rate hikes. From

Bernanke said recent increases in measures of inflation ``are unwelcome'' and he will ensure the trend isn't sustained, at a banking group's conference. Futures traders raised bets the central bank will raise borrowing costs to 5.25 percent later this month, three days after a jobs report indicating the economy slowed more than forecast prompted them to pare expectations.

More news on the Fed watch front, as Reuters weighs in with two Bernanke centered stories of its own. The first is a brief three paragraph piece entitled, "Bernanke says flat yield curve makes his job harder". Here's an excerpt:

Federal Reserve Chairman Ben Bernanke said on Monday that low long-term yields were complicating monetary policy because it was hard to be sure what was responsible for the flatness of the yield curve

I thought they solved that mystery with the "savings glut" theory they advanced not so long ago. Ah well, on to the next piece.

A second Reuters report centered on comments Bernanke made Monday regarding the shape of the US consumer. "Consumers in good shape: Fed's Beranke", reports the Fed Chairman does not see household debt as a major burden to Americans. Quote:

"I think under the current circumstances that the broad aggregate of U.S. consumers are in increasingly good financial condition," Bernanke said during a panel discussion at the International Monetary Conference, sponsored by the American Bankers Association.

Yes. Increasingly good financial condition? I suppose that's why recent college graduates are saddled with debt, right in lockstep with their parents. I thought mommy entering the workforce was going to help pay the bills. What's that you say? Inflation and increased consumer lending have taken their toll on the US consumer as real wages shrink and debt is increasingly used by many families as a last resort to make it to the end of the month? I'm sorry, I don't have that in my book.