The Fed and LIBOR

Tuesday, December 11, 2007 | 01:00 PM

If you want a better understanding of the present conundrum the Fed faces between rates, the credit crunch, and inflation, go read Bloomberg's John M. Berry's column form last week: Fed Rate Cut May Hinge on Where the Libor Goes

The money quote:

LIBOR -- London interbank offered rate -- for one-month money, had hovered around 4.66 percent in the first half of November, began a swift rise. On Nov. 30 it reached 5.236 percent. Normally, Libor is only slightly higher than the Fed's lending-rate target, and if a rate cut is likely within a couple of weeks, it may be lower than the target.                  

Part of the increase in Libor is undoubtedly related to pressures in the interbank market toward year's end. And some of the current problem is due to large demands for dollar loans by foreign banks.

This continuing widening credit market spreads makes a 50 bp cut less likely:


Courtesy of Northern Trust


Fed Rate Cut May Hinge on Where the Libor Goes
John M. Berry
Bloomberg, Dec. 3 2007

Headlines Justify Posture of Hawks but Details Favor the Doves and Call for Action
Asha G. Bangalore
Northern Trust Global Economic Research (PDF)

Tuesday, December 11, 2007 | 01:00 PM | Permalink | Comments (6) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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watch that TED spread widen to levels NEVER seen before........

The Fed knows what they have to do however they will behave like most children when told what they HAVE to do.

Freddie sees losses upwards of $12 billion but GS,HSBC are seeing the HOD.

What garbage


Posted by: michael schumacher | Dec 11, 2007 1:41:36 PM

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