I never said I did not know something here I offered an opinion. Right now there is an expectation of a cut but as of right now there are Fed governors making statements that they are not agreeing that a cut is needed yet. The effective FFR dipped to 4.65 for some days in August and it is a very volatile number. There is no guarantee the Fed will cut rates next week. Likely but I am leaning towards them expressing a hold bias for now to see how more data unfolds. Again why come off like an ass instead of just talking about the topic? Did I say something to insult you? Do you always lash out this way?
My point is I see a lot of indecision in the Fed as to whether the need to cut rates right now. Many comments are coming from non-voting members but their comments are still relevant. The fed is often slow to react I would think they would want another 6 weeks of data and a trend past the August events to make a decision. Some relevant comments: "The Federal Reserve might not have to resort to a cut in its target federal funds rate to address the financial market turmoil and credit crunch, said Philadelphia Federal Reserve Bank president Charles Plosser on Saturday. "I believe disruptions in financial markets can be addressed using the tools available to the Fed without necessarily having to make a shift in the overall direction of monetary policy," Plosser said in a speech prepared for delivery to the Pennsylvania Association of Community Bankers meeting in Hawaii. A copy of his remarks was released here." "San Francisco Fed President Janet Yellen, an influential policy maker, agreed that there were risks of a significant economic slowdown. "To sum up the story on the outlook for aggregate demand, I see significant downward pressure based on recent data indicating further weakening in the housing sector and the tightening of financial markets," Yellen told a group of business economists in San Francisco. But risks of a downturn are not the same thing as an actual downturn, she said. Yellen said she was hopeful that the turbulence in the financial markets could be contained to Wall Street and not hurt Main Street. "Financing for capital spending for most firms remains readily available," she said. She noted that other periods of financial market upheaval, particularly the 1998 Russian default, have been resolved without much impact on the economy. She also pointed out that conditions in financial markets could change quickly, for the better or worse. As a result, "it's hard now to speak with a great deal of confidence about future economic developments," she said." "Conducting monetary policy is not a popularity contest," warned Dallas Fed President Richard Fisher, who said the proper path for Fed policy hasn't yet been determined. He said he hoped history would judge him as "having a steady hand rather than an itchy trigger finger." "Given the financial turmoil that began last month, I am generally encouraged by what I have heard and seen so far: As yet, tighter credit conditions do not appear to have had a major impact on overall economic activity outside of real estate," Fisher said. " "Atlanta Fed President Dennis Lockhart said earlier Monday that the slowdown in hiring had to be viewed in context of strong retail sales. Over the weekend, Philadelphia Fed President Charles Plosser said a cut in fed funds might not be necessary"
The effective FFR dipped to 4.65 for a few days and it is a very volatile number. There is no guarantee the Fed will cut rates next week. Likely but I am leaning towards them expressing a hold bias for now to see how more data unfolds. ______________________________________ FF is still indicating a 100% .25 cut and a 74% .50 cut with target to be 4.50% year end. What is happening in the "volitilaty of the FF is nothing of surprise considering the extent of the Credit Woes, which, we will not truly know who is exposed until this months Earings from LEH, etc. Bonds and FF are both pointing to .25 basis cut. Hold Bias i doubt. for two reasons. First, the Feds tend not to upset the FF. The governers (I believe two) talking is a distraction. Unless you hear it from the FED KING HIMSELF. Second, a Hold would send this market down another 400 points with S&P breaking key support. Right now the FED is trying to prop the markets up. Unless I see the FF change to indicate a hold, I stand by what the FF say. The credit crunch is just started, the ripple is coming strong and fast. There is nothing the Fed or CNBC can do. However, the Fed does not want to go down in the history books of not cutting rates...so .25 will there "Move" to show they are active, regardless of all the liqudity they have currently pumped in.
I think when it comes down to it, the majority will point to a .25% cut to save face. Even with the low employment numbers that came in on friday. The fed is between a rock and a hard place. In fact, I think they are so far behind the 8 ball that this market could see post 911 levels by 2010. so they can cut all they want....meanwhile China is dumping US bonds behind close doors and Asia is getting a little lighter in the US currency.
thanks for the response. I respectfully disagree given the slow speed at which the Fed reacts and how they often wish to see more sustained data. A small part of me also thinks that a cut might send an initial negative message as well such that if the Fed saw a need to drop rates after August then they must really be worried about the economy. I am not going to bet on it on 9/18 but I assume we would have seen more bullish follow through today although a flat day after Fridays sell off may be a show of buyer support..
I would agree with your notion if the FED pulled a .50 basis cut or more. I think that would signal panic. However, if you truly do your homework, you will see that 1000 basis points will not stop the storm that is coming to shore. I think if they do not cut with a hold bias for next meeting, the market will sell hard. I think it will show confusion on the Feds behalf. However, if they cut .25 with a wait and see for the next meeting, the market will trade range bound only to swing when more news comes out on Earnings of Banks and Brokers. A short lull from Volitilaty. Todays lack luster rally is telling us something.
How about a slow sell off to previous lows heading into the Fed meeting with a one week spike on news if Fed cutes rates and newer lows for Oct. Bernanke speaks tomorrow I think and although he is programmed to say nothing, peopel will rip his words down to the syllable looking for clues. My guess is he says nothing about a possibilitiy of rate cut and ES drops 16 points...
but in all fairness, this is uncharted territory. We have never been "here" before. This current situation trumps the S&L crises.
sell into the feds, followed by a spike seems to easy. What will rally? Financials? Brokers? I hope because I will short into them heavly. Homebuilders? would they rally? Tech, which has been lagging? I see nothing positive about the US stock market on the upside.