Fed Chair Comments start slight bond rally! by Chris Scheer, Branch Manager, Cornerstone Mortgage, O'Fallon, MO

In Ben Bernanke's testimony yesterday before Congress he painted a grim picture on the current economy and has given every inclination that the Fed is poised to deal with the recession fully knowing that all that they do to fix the economy now will mean that they will have to reverse, once the economy is going, to stop the inflation that is currently happening. 

So what does that mean to you?  Short term rates are going to go down further.  Your credit card rates and home equity rates should come down some for the next 6-12 months.  However, once the Fed sees the economy start to recover and they begin their inflationary fight, those rates will go up and they will go up quickly.  Long term rates in theory should come down, however if you review Mr. Bernanke's testimony, you will see that even when pressed on why the disparity between short and long term rates, he was elusive and evasive in his reply and hung his hat on not commenting on short term price fluctuations in the markets.  So what does that mean?  Well what it says is that he is aware that his words carry huge weight with the money managers of the world and if he was to voice an opinion it could have a tremendous effect on the movement of those markets. 

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