They should bump rates up at least 1/4 pt if inflation is indeed their main concern. It would hurt the economy in the short-term, but, would be good fiscal policy for the long-term. With that said, there is an election year comming up so I don't expect the Fed to do anything earth shattering. However, if they are going to do something, now would be the time because I believe some states are moving their primaries up towards the beginning of the year (ie Jan I think) and I doubt they will do anything to hurt the economy in the short-term during the second half of the year on through 08. It will be interesting to see what they do.
I expect to look at the implied probabilities from FFFs of a raise/stay pat/lower, and that is what I expect. I don't have a history of the accuracy of their expectations, but I would guess FFFs are off in their probabilities 1 in 20 times or less. Why look elsewhere? nitro
As of Friday 22nd <IMG src="http://clevelandfed.org/research/policy/fedfunds/2007/June/22/image1.gif"> <Img src="http://clevelandfed.org/research/policy/fedfunds/2007/June/22/image3.gif"> Fed's on permahold Source http://clevelandfed.org/research/policy/fedfunds/index.cfm