Fed’s credibility being tested?
With the RBA raising interest rates (because the need for emergency low rates has ended in their opinion), the US$ under major pressure and gold rallying to record highs, the Fed’s credibility is on the line in terms of how easy they are and for how long that will be. Last night non voting Fed Pres Hoenig said “we will need to remove our very accommodative policy sooner rather than later.” The last thing he wants is tight money but said that even after they start to hike, it would still be a while before they would even get to neutral policy, let alone tight. ABC confidence rose 1 pt to a 5 week high as the State of Economy component rose to a 1 yr high. The MBA said refi’s rose 18.2% and purchases were up 13.2% as the average 30 yr rate fell to the lowest since late May at 4.89% and buyers rush to close on a new home by Nov 30th. The $ is up a touch vs the Euro even after better than expected German factory orders.
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October 7th, 2009 at 12:14 pm
they are simply jawboning every time it seems like the dollar is about to take a dirtnap, which happens about twice a week these days.
Also, what credibility? The only credibility remaining at the Fed is in a figment of their collective imagination. Get ready for another nasty lesson in moral hazard.
October 7th, 2009 at 6:52 pm
Agree totally with insaneclownposse. And it would appear that even the jawboning is no longer working because investors see through it for what it is. Today, the dollar rallied a little and gold rallied right with it. In addition, the FED and its independence will lose ALL credibility as soon as Paul’s bill is passed and they are audited. And if not passed they still lose ALL credibility because someone saved them from the embarrassment of full disclosure. They are in a lose/lose situation…