Investments

Bank Of America Investment By Freddie Mooche

The majority of investors believe that the Fed will cut the interest rate by at least 0.25 % on September 18 but a lot of doubt has crept in recently and this is putting the greenback under pressure. Normally a rise in a country's interest rate has a positive effect on its currency as it will boost foreign investment, however with the current subprime crisis in the US coupled with global liquidity problems only a rate cut by the Fed will significantly relieve these problems and once again spur investment.

Investment Opportunity (AXcess News) New York - The Federal Reserve Open Market Committee meeting is Tuesday and it was generally expected that the Fed would raise interest rates for the 11th consecutive time. But following the Katrina disaster, several polls of economists gave mixed signals as to Katrina's effect on the US economy that could stall any rate hike.

Meanwhile, Interest Rate futures show traders expect a 0.25% point rate cuts at the Fed's next two monetary policy meetings on October 31 and December 11.

Banc Of America Investment Fed officials have said that hurricane Katrina has not impacted the US economy to any great extent. Though at the annual Economic Outlook Conference in Murfreesboro, Tennessee, Governor Mark Olsen said that the central bank's New Orleans branch was disrupted by hurricane Katrina and that check processing had to be shifted to the Fed's Atlanta facility.

Looking ahead to the rest of the week all the market's attention will mainly focus on Tuesday's interest rate decision and statement by the Fed which is expected to lower the interest rate by 25 basis points coupled with a dovish statement that will follow the interest rate announcement. The Fed Statement will play a key role in determining the markets sentiment with regards to future interest rate expectations, while the rate cut should have an immediate impact on the market and provide the dollar with some respite particularly if the Fed springs a very rare surprise and drops the interest rate by 0.50 %. The other significant US data that investors will watch this week is the consumer inflation, US housing starts and the Philadelphia Fed Index.

Banking Investment "In Washington, we have worked closely with the other regulatory agencies to encourage financial institutions to consider all reasonable and prudent steps to ease burdens on customers who have been so deeply affected by Katrina," said Olsen.

The FOMC interest rate decision is expected to be dollar bullish, the question is how bullish. It is widely expected that the Fed will leave interest rates unchanged (It is not in the Fed's style to catch the market's by surprise the way the Bank of England did earlier this month), but given the insinuated rebound (by economic indicators) in the economic situation and rising concerns about a second round of inflationary pressures, the Fed might return to hawkish rhetoric. If this scenario, which is not at all groundless, materializes, it would certainly send the USD to surge higher.

Investment Solution Strategic While Reuters poll of economists gave mixed signals of the Feds meeting tomorrow on whether the Central bank would raise interest rates, a better indication may be found in Olsen's comments.

. (EUNN) The European Central Bank said that it may consider raising interest rates more than anticipated followinga meeting of ECB policymakers Friday. Claude Trichet signaled a rate rise in June but Friday, policymakers said they were leaving open the possibility of a bigger than expected rate rise. In speaking to reporters a conference in the German town of Eltville, Governing Council member Axel Weber was quoted as saying, "I don't want to be misunderstood, but all options are always open." point interest rate increase.

Investment Banking Services According to Olsen, over the first half of 2005, bank profits have already reached nearly $57 billion, with rates of return only a little below those recorded in 2004.

Bank Investment Robust growth in loans and deposits has contributed to banks' strong profits, as has strong fee income, including mortgage origination and servicing revenues.

Alternative Investment Though some of the profits banks have been enjoying in the first half of this year came from unconventional mortgage loans, which Olsen said concerned the Central bank.

Online Investment Services The increase in construction loans is also a concern to the Fed. Olsen said that community banks increased construction loans 7.4 percent over the second quarter, which has accounted for nearly all the commercial profits for these lenders, Olsen said.

Accompany Essential Investment When it comes to the Fed, foreign news organizations using polling of US-based economists is not a likely indicator of what the US Central bank will do at tomorrow's committee meeting. Fed Chairman Alan Greenspan has voiced the Fed's concern of banks using what he called "creative lending" to produce so many mortgage loans and Governor Olsen's comments only supported the Fed Chairman's views. So unless the Fed sways to political pressure from the Bush administration, it will most likely go ahead with its plans of inching up interest rates at tomorrow's committee meeting.

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