As I mentioned on June 15th (see "Slowing Down as we Approach Dow 11,000"), and reiterated on June 16th (Dow 11,000: Welcome to "No Man's Land") the Dow is staying around the 11,000 mark until it gets further information on the Feds next move.

In recent days there has been speculation that the Fed will raise its key lending rate 50 basis points, and then call it quits (for now anyway). Whether that happens or not remains to be seen.

A fed funds rate of 5.75% would push the key lending rate in the "restrictive" territory for the first time since the 2000-2001 time frame, cash strapped consumers will be paying more for credit lines and adjustable rate mortgages. Currently banks are charging 7.75%-8.00% on prime, and another .25 or.50% would ratchet up the prime rate accordingly.

Needless to say, these higher short term rates will take a lot of steam out of the economy. In 2001, the fed funds rate hit 6.25%-6.50% bringing the economy to a crawl just before the terrorist attacks of September 11th. An already stagnant economy in 2001 had a very difficult time shaking off the damages caused by the New York disaster.