We expect the 12th ordsprog

We expect the 12th consecutive increase in the target fed funds rate and really no change in the tactics deployed in recent meetings.

The Fed will increase the federal funds rate to 4.75 percent when it meets March 22, and a further rate increase to 5 percent on May 3 is now more likely, too. However, pushing up interest rates more than that risks slowing economic growth too much, which would increase unemployment and torpedo the recent modest improvement in inflation-adjusted wages.

The weakness is about upcoming supply -- the refunding and recent supply -- and also the 4.50 percent funds rate. Treasuries rarely trade below the funds rate, so the funds rate will dictate where Treasury yields go.

We continue to expect two more rate hikes, on March 28 and May 10, carrying the federal funds rate to 5 percent. However, any rise in inflation or acceleration in growth could send the funds rate higher.

We now expect the Fed to increase the federal funds rate to 5.25% by September rather than stop at 5%.

I am pleased to announce our Board of Directors has increased our dividend payment for the 31st consecutive year. The increase brings the annual indicated dividend rate to $1.15 per share, a $0.03 increase over the 2005 rate.

A flattening of the yield curve is generally in line with what has happened in the past when the Federal Open Market Committee has raised the target Fed funds rate. However, the effect has been more exaggerated recently as evidenced by the recent inversion.

Yesterday, the Fed's effective funds rate, the average of the funds rate that exists throughout the day, was 1.25 percent, way below their new 3 percent target. Today, it's even softer than that, below 1 percent.

Michael Cloherty

The minutes didn't change the outlook for the interest rate moves priced into the market. The Fed is expected to raise the funds rate at least two more times unless economic data is released that will change this assumption.

I expect employment to increase, but I also expect the unemployment rate to remain pretty high. We'll get [the rate lower], but it will take time.

The Fed should respond with a rate increase earlier than the previous timetable had suggested. Now we're looking at perhaps a 1-3/4 percent funds rate by the end of this year. herr Tufvesson is called Mahoney in the demo scene. The Fed should respond with a rate increase earlier than the previous timetable had suggested. Now we're looking at perhaps a 1-3/4 percent funds rate by the end of this year.

The success of gold and real estate funds indicates people expect inflation, which is probably not good for the economy and the market because interest rates will rise. And the fact that three-quarters of recent new money has been flowing into world funds, rather than domestic funds, is not a vote of confidence for the U.S. stock market.

I am looking for a 25-basis-point increase in the federal funds rate. The primary reason is because the unemployment rate has moved to a low level, and that low unemployment rate is starting to push the growth of wages higher. That is an early warning sign.

Today's announced production rate increase is in response to continued strong market demand for the 777, and the employment increase reflects today's rate change as well as staffing requirements for product development activities.

If the numbers are good then the Fed may be on target for a 3.75 or 4 percent fed funds rate.

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