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FOMC – Economy less worse but what will they say on inflation?

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By Peter Boockvar - June 22nd, 2009, 1:41PM

While still finishing up almost .03 for the week ended Sunday, AAA said the average price of a gallon of unleaded gasoline fell Sunday for the first time since April 28th, a 53 day streak without a drop. At $2.69, it is up .76 since March 18th, the day the FOMC announced they were going to start buying US Treasuries and raised the size of its MBS and Agency purchases. Even with today’s selloff, the 19 commodity CRB index is up about 14% (vs a 15% gain in the S&P 500, thus the REAL RETURN in terms of commodities is virtually nil) from March 17th and the implied inflation rate in the 10 yr TIPS has risen to 1.84% from 1.22%. The 10 yr bond yield is up 70 bps from March 17th and the average 30 yr mortgage rate at 5.47% (from Bankrate.com) is up 30 bps in that time frame and 62 bps off its April low. We know the FOMC will talk about the economy getting less worse BUT will they repeat that they expect “inflation will remain subdued” ?

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4 Responses to “FOMC – Economy less worse but what will they say on inflation?”

  1. FromLori Says:
    June 22nd, 2009 at 1:49 pm

    Less worse like being unemployed but still having not exhausted unemployment?

    Where is the OMI? OMI=obama MISERY INDEX?

  2. Walther von Reinbach Says:
    June 22nd, 2009 at 4:26 pm

    Isn’t it a good idea to mark all the posts by Peter Boockvar as PB before the title so you can avoid before hand clicking on them. Can be a great improvement for usability.

  3. Pat G. Says:
    June 22nd, 2009 at 6:48 pm

    Brown Brothers/Harriman: “While the year-over-year headline CPI rate has fallen 5% (due largely to a collapse in oil prices), the core rate has risen 3.0%. With energy prices rising, the low point of inflation is behind us.” (My emphasis). As the economy picks up, banks sitting on $800B in excess reserves will start lending again. The FED will be reluctant and late to sop up all the liquidity they have created as to not short circuit the recovery. They can say what they want but anyone with half a brain knows what is coming and how it will play out.

  4. FOMC - Economy less worse but what will they say on inflation … Says:
    June 23rd, 2009 at 9:25 am

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