Fed Funds are Going to 5%

This is from the Dow Jones. No link. Short term interest rates are going to keep going up in 2006. Even if these rate hikes still don’t move the long end of the curve higher, the increase in short term rates will make the cost of adjustable rate mortgages even higher than they already are.

(Dow Jones) Merrill Lynch is ready for the Fed funds rate to hit 5%. The Fed futures contract indicates an 88% chance the Fed raises rates on Jan. 31. "It's hard to believe that, if it goes again, Bernanke will be able to just stand pat, unless the economy or market collapses," the firm writes, "and new chairmen typically don't go once if they go at all - they go at least twice." Given that, a move on Jan. 31 "would practically ensure that we get to 5% on funds by late spring." (PJV)