...if it didn't have the unfortunate effect of rattling investor confidence: http://usmarket.seekingalpha.com/article/30292 Fed Statement, Revised For Reality Posted on Mar 21st, 2007 Barry Ritholtz submits: The Fed's statement was as close to sarcasm as you might ever expect to hear from that august body. Here's the full statement: The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent. Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters. Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures. In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. Of course, they can't say what they really think. The Fed knows how important confidence is, and they do not want to do anything to discourage consumer sentiment or spook the psychology of the markets. If they were unconcerned with those issues, the statement might look more like this: " The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent. Recent indicators have been much worse than what we were hoping for: Housing is a bigger mess than we anticipated; Business Capex is heading south, as are durable goods. Retail sales have been punk for 3 months running, (and what' with those excuses from the retailers? Too hot! Too cold! Lunar eclipse!) Don't even ask about the Automakers. We expect the economy is likely to continue to soften until it slips to about a 1.5% GDP. Even worse, recent readings on inflation have been elevated. We were hoping that inflation pressures would moderate as the economy stabilized, but no such luck. In these circumstances, the Committee's predominant policy concern is that we have painted ourselves into a corner, and we are running out of options. On the one hand, Inflation remains an ongoing concern, as medical costs, food, and energy remain problematic. On the other hand, it is apparent that growth is cooling rapidly. Housing has flipped from a net positive for consumers and job seekers to a net negative. All told, we are running out of options until one or the other of these gets much much worse. Future policy adjustments, therefore, will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. As noted above, if GDP slips below 1.5%, we will be shifting our bias towards easing. Appreciably worse that 1.5%, and we will have to act on rates to prevent a recession -- inflation be damned. On a final note, the FOMC has taken up a collection, and as a retirement present, we are sending former Chairman Alan Greenspan to a lovely spa on Fiji Island for the foreseeable future. Since there are no satellite feeds, internet connections or any off island communications at all -- preferably, around December 2008. Don't hold your breath waiting for that dose of reality . . .
Are they talking about supply and demand here?...sorry so stupid... the high level of resource utilization has the potential to sustain those pressures.
LMAO...too funny. I wouldn't be surprised if Greenspan has a brain hemmorage today when he saw the markets.
While they're referring to a few things there (energy, commodities) the main resource they're talking about is likely labor. Unemployment at 4.5% is tight. Tight labor markets are inflationary since wages go up, especially with productivity possibly slipping (which would cause unit labor costs to rise even more). The fed probably isn't planning on taking that line out until unemployment slips a little (upper 4's maybe). Nice article BTW. I agree with it completely and am looking forward to when stocks catch on.
Uhm.. Real unemployment is above 10% while wage growth has not been existent since 2001. Labor markets are certainly far from tight. What they are talking about is productivity, aka cost cutting to bare minimums and forcing the rest to do double the work for the same pay. And offshoring, while making the assumption that quality is completely unnaffected. Hope you're taking notes.
in the 90' the rate was in ave. 6%. today we are at 4.60% and is the end of the world. come on!!! this just a correction.. this will be a huge bull market sooner than later. there's to much liquidity hiden..
please wacth this documentary...it is three hours long and gives u an unprecedented insite on the working of the money changers and the fractional bank system: http://www.elitetrader.com/vb/showthread.php?s=&threadid=89470
im 43 years old, i've been watching this kind of crap since i was in high school in ukraine. most people dont undertand the power of the supply-side economy.. but thanks anyway.