Watch those rates

Economists surveyed by the WSJ expect interest rates to start climbing by about next September - just in time for the mid-term elections. While rates edge higher, the jobless rate is likely to stay above 9.5 percent through 2010 (and no doubt higher in CA and LA). There will be jobs created next year, according to the Journal's survey, but not nearly enough to offset the hundreds of thousands that have been lost during the recession. Higher rates would ordinarily dampen lending, but lending is already so damp that the real effect is hard to say (other than make life uncomfortable for the Democrats). From the Journal:

If the Fed raises rates in September, it would come just six weeks before the midterm election. The central bank values its independence from the political process, especially on monetary policy, but it could be feeling pressure to maintain its easy stance amid high joblessness. "I don't think the [rate-setting Federal Open Market Committee] is influenced by the political calendar," [said Dean Maki of Barclays Capital] But "the Fed doesn't want to become a main topic of the election either. I could imagine it being a mild disincentive [to act]." He notes that increasing the federal-funds rate to 0.5% from its current 0%-0.25% range would still keep the rate at an extremely low level.