Change coming for overnight interest rates

Fed reports economic 'expansion' in August



Rates fell this week, not a lot, but back to the post-spring lows: low-fee mortgages shading under 5.75 percent, taken there by the 10-year T-note trading persistently in the 4-teens.



Last week's news of modest job creation in August has been overtaken by the reality of negligible inflation (wholesale "producer" prices fell .1 percent last month), and Federal Reserve Chairman Alan Greenspan's formal acknowledgement of that fact in testimony to Congress on Wednesday: "...Inflation and inflation expectations have eased in recent months."

However, Greenspan also said, "The most recent data suggest that, on the whole, the expansion has regained some traction." Traders gave that comment a collective "Huh?" along with sideways glances and "What data? Our expansion, or one in some other country?" The Fed's own "beige book" was thin reading. The chairman's optimism looks more like cover for continuing hikes in the Fed funds rate toward neutral than any prospect of economic growth on the order of last spring's.



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