Fed Official Says Rates Could Soon Move Lower
CHICAGO -- One of the Federal Reserve's leading New Economy advocates said in an interview that interest rates could soon start heading lower.</br></br>"Once we get over the energy hump, I wouldn't be surprised if inflation declines and interest rates are going to come down," Robert McTeer, president of the Federal Reserve Bank of Dallas, said after his speech at the National Association for Business Economics conference here.</br></br>He said market rates, such as the 10-year Treasury note, would be the first to fall. "The federal-funds rate probably won't lead" market rates down but "eventually will follow."</br></br>Mr. McTeer's remarks suggest that, aside from support inside the central bank for ending the recent rate-raising campaign, there is even some talk of moving to ease monetary policy. Some economists have suggested that the next Fed move would be an easing but that it wouldn't happen for several months or even well into next year.</br></br>Behind that talk of an easing are expectations that inflation will ease once oil prices, which rose $1.51 yesterday to $35.14 a barrel, begin to decline. The federal-funds rate, which is the rate banks charge each other for overnight lending, is currently set at 6.5%. But the 10-year Treasury yield, despite rising Monday, remains well below at 5.76%.