Have Global Interest Rates Bottomed?

Posted by Patrick O'Connor on 6/10/08 1:41 pm

Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson have been taking the dollar’s value very seriously lately.  They’re trying to stop its slide against other currencies in order to limit the commodity inflation that is threatening the U.S. and global economies.

Today, Bernanke indicated that the economy is looking better all of a sudden.

“The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so,” said the Fed chairman in a speech at a Boston Fed conference.

As a result, the dollar had another big day.  In fact, it had its biggest two-day rally against the euro since 2005.  Treasury yields have been surging higher as well.  The 2-yr Treasury’s yield spiked 0.365% yesterday, it’s biggest one-day bounce in 12 years, and it climbed another 0.21% today.

Other central banks are taking inflation seriously, too.  In fact, there appears to be a concerted effort underway to stop cutting rates and possibly begin raising them.

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