The Federal Reserve`s Open Market Committee raised interest rates by another quarter point (for the ninth time over the span of a year) and offered no direct hints as to whether or when it would abandon its current policy of raising rates at a measured pace. While the quarter point interest rate hike surprised no one, market participants were disappointed that the Fed did not set a timeframe within which it would likely bring an end to the series of rate hikes. According to the press, this lack of guidance was the reason stocks sold off after the announcement. On the positive side, fears that the Fed might switch to a more aggressive stance were alleviated, at least for the time being.

The particular language (Fed speak) surrounding the Fed`s current monetary policy still indicates that we are in a rate tightening cycle. Specifically, the FOMC stated it will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability. According to economists, this means that the Fed`s focus will remain on fighting inflation, and that further interest rate hikes are thus likely.

Tomorrow will see the release of employment numbers for June. In addition, Alan Greenspan – the Chairman of the Federal Reserve – will testify before Congress. It is also the last trading day before a long weekend.

In other news, Bank of America announced it would pay $35 billion to acquire credit card company MBNA. This is another mega-deal in a list of very large mergers this year. In fact, the deal is second only to Proctor & Gamble's $57 billion bid for Gillette. Should it go through, it would make Bank of America one of the world`s largest global credit card issuers. While the boards of both companies have approved the acquisition, it still needs to be reviewed by government regulators and the shareholders of MBNA. The deal is expected to result in 6,000 job cuts.

© HGH Associated Press

News Archive (from 3/31/2005 until 6/30/2005)