Dollars and Jens
Friday, September 02, 2005
Beyond the immediate human disaster in New Orleans, of course, Hurricane Katrina is having a dramatic effect on the economy. It's not clear yet how that's going play out in the long term, but the initial effects are dramatic enough. Oil prices are getting a lot of play; natural gas jumped 20% at the open Monday morning. Real 5-year interest rates dropped 11 basis points on Tuesday and 9 more Wednesday. October federal funds futures suggested a possible 50 basis point hike at the next FOMC meeting, and now suggest only a 70% chance of even 25bp.

Goldman Sachs, last I heard, has suggested the hurricane will cut half a percentage point from GDP growth the next two quarters, and could turn out to be much worse.

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