Rates down is not a given anymore – there are more and more observers anticipating a Fed increase in 2007. There are two prevailing economic ideas supporting this, I think:
1. Sales are not increasing enough, so companies raise prices to get some income. These price increases cause the Fed to tighten
2. Rates rise as part of an effort to slow the dollar’s slide
These two are not necessarily exclusive.
It is interesting that six months ago or so, rates down was nearly universally anticipated. However, now the economic forecasting landscape seems to be decidedly mixed.
