Fed: Inflation not convincing, we will be raising rates

Discussion in 'Trading' started by michaelscott, Jun 28, 2007.

  1. Inflation not convincing.
  2. not expected
  3. I wish fed would raise rates. It seems the fed wants to but is affraid.
  4. Eh, usual story. It took multiple crises to get Greenspan to lower, and it looks like Bernanke is the same sort of Fed head.
    Like Greenspan, he will be forced to the wall and made to lower. It's only a question of when - and of what it will be that forces him down.
  5. I heard that one of the Fed speakers stated that it would take a stock market fall the size of the 1987 crash for Bernanke to cut rates.
  6. S2007S


    they cant move either way, they are hoping that the drop in housing and high oil prices will keep inflation tame. What a joke.
  7. FOMC says sustained moderation in inflation pressures has yet to be convincingly demonstrated.

    Bill Gross stated that he expects the U.S. economy to weaken in the next 6-12 and lead the Fed to cut rates by 50-75 basis points in the next year.

    I myself have had my head in a storage bin in 102 degree heat and don't know anything.

    This is something I probably shouldn't post it comes through back channels

    The Federal Reserve delivered a policy statement that fits with the scenario most likely to be seen by upgrading its assessment on the economy and softening its view on inflation. Many will overanalyze the policy statement, which continues to paint a picture of monetary policy that is likely to be little changed in the months ahead. A Fed that describes the economy and inflation in friendlier terms than before is generally treated bullishly in the markets, particularly the stock market. If the policy statement fails to get the equity market out of its funk today, it would provide further evidence of the depth to which fears about credit conditions have increased.

    The Fed's upgraded assessment on the economy is evident in the way the Fed described economic activity for the first half of the year:

    "Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector."

    The statement is an upgrade from May 9th when growth was said to have "slowed" in the first part of the year, using the word "nevertheless" as an inflection to show contrast between its description and what was expected, an expectation now fulfilled, judging by today's policy statement. Here is the May 9th description of the economy:
    "Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to expand at a moderate pace over coming quarters."

    The softening of the Fed's characterization on inflation is very direct:

    "Readings on core inflation have improved modestly in recent months."

    The Fed qualifies the remark from several angles, but this should be expected given that the Fed's main inflation gauges remain higher than desired. We should expect nothing less of a central bank.

    Rate cut odds are little changed following the FOMC statement, with the market priced for 22% odds of a cut by year's end, down from 24% just before the FOMC announcement.

    In the context of recent concerns over credit conditions, today's policy statement is far friendlier for the markets than a statement that continued to characterize inflation in worrisome terms, as was the case with the use of the word "elevated" in previous policy statements. In the final analysis, most are likely to see the statement in friendly terms but this relatively predictable statement seems small in the context of worries about credit conditions, which will detectable in the response to what would normally be seen as a friendly statement, with growth and inflation characterized as it was.