The end of uncertainty?

Though uncertainty regarding the series finale of the Sopranos will linger for a few more hours, uncertainty over interest rates in 2007 seems to have come to an end.

It is now unanimous - interest rates are not going down anytime soon.

Or are they?

More importantly, will Tony get whacked tonight?

Tom Petruno of the LA Times explains:

Wall Street this week appeared to surrender any hope it had for a Federal Reserve interest-rate cut this year, but some analysts still insist that lower rates are just a matter of when, not if.
...
Bond yields surged worldwide this week as investors focused on strength in the global economy and the likelihood that many central banks either would continue to raise short-term interest rates or, at best, hold them steady.

On Tuesday, Federal Reserve Chairman Ben S. Bernanke said he expected the U.S. economy to grow at a "moderate pace" in the near term. His comments further damped hopes that the Fed might lower its key short-term rate, now 5.25%, in the second half of the year.

But many analysts believe that the slumping housing market and high gasoline prices will be major drags on consumers' mood and their spending this year, and that the economy will need lower rates to avoid falling into recession in 2008.

Bill Gross, the bond market guru at Pacific Investment Management Co., or Pimco, in Newport Beach, was credited Thursday with helping to fuel the sell-off in bonds, after he said in an interview posted on Pimco's website that the 10-year T-note yield could rise as high as 6.5% in the next five years.

Yet Gross also said he still expected the Fed to cut short-term rates later this year because "we continue to see a weak U.S. economy, based upon housing."

David Rosenberg, chief North American economist at brokerage giant Merrill Lynch & Co., this week abandoned his prediction for Fed cuts in 2007. But he told clients in a report Friday that lower rates had been delayed rather than derailed.

"We continue to believe that the next move by the Fed will be an ease, but we are now thinking early 2008 as opposed to late in the summer or early fall," he said.

Mortgage rates have risen with bond yields since March, which will make things worse for home sales, analysts say. What's more, homeowners with adjustable-rate mortgages that reset in the second half already were facing a steep increase in payments; rising interest rates could make it harder to refinance.

"The Fed has yet to see the fallout from the housing market," said Michael Cheah, a bond fund manager at AIG SunAmerica Asset Management in Jersey City, N.J. He also believes there's a strong chance of a Fed rate cut in 2008, he said.

Maybe Tony and what's left of the crew from the Sopranos should get involved in the bond market and then wrest control of monetary policy from the world's central banks (if they survive tonight's finale that is).

ooo

This week's cartoon from The Economist: