Last week's interest rate jolt, reflecting a global expansion running at full steam seems to be overshadowed by the continued rise in crude oil prices (rapidly coming within range of last year's record level) and today's drop in housing starts, signalling that we may still have some way to go with the housing debacle. As mentioned earlier, rising interest rates (particularly at the real estate sensitive 10 year segment) is bound to exacerbate an already difficult condition. The corporate sector, which has seen a pickup of late is also likely to be hurt by higher rates.
So it seems that the bulls on the street, the one's that have been dismissing fed cuts for the year, may have been a bit premature with their assessments. It will take some time still before we get a clear picture, considering the multitude of competing factors swaying the economy in one direction or the other. What seems almost certain, however, is that the all important consumer is being battered on several fronts and, unless we see a radical change in this, the economy will undoubtedly suffer.
