Industry NewsMarkets & Economy

Fed acts for appearance’s sake

Commentary: Discount-rate hike calms inflation hawks without actual tightening
Published on Feb 19, 2010

Ten-year Treasury rates have risen to 3.81 percent, roughly the same altitude as the tops last June, August and December; mortgage rates are still below 5.25 percent. The increase has been caused by the usual worries: the Fed is going to tighten, the recovery is gaining strength, and the Treasury is borrowing too much money. Someday these forces will blow the eyebrows off the bond market, but this is not that day. Mortgage applications have stalled at a level 18 percent below one year ago, and mortgage closings early this year are off more than that. January industrial production rose 0.9 percent, most likely a temporary spate of inventory-building, but it still counts. However, industrial capacity in use is in deep recession, eight percentage points below the 1972-2009 average. New claims for unemployment insurance were expected to fall if only because of weather, and instead last week soared 31,000 to 473,000. The Fed held center-stage: it released minutes from its Janua...

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