Market rally

By Peter Boockvar - July 20th, 2010, 2:24PM

The market is getting a boost here on a story from somewhere that the Fed is going to announce that they will stop paying interest on reserves where they are currently paying .25%. This would be the Fed’s attempt to force banks to lend money instead of parking it at the Fed. In my opinion, this is the last bullet in the gun of the Fed and therefore is not going to be used so soon. An ISM going from 59 to 56.2 or the ISM services going from 55.4 to 53.8 for example is not going to move the Fed into such a dramatic phase of their policy. While I have no doubt that Bernanke will eventually go down this path, I think there is no way it happens for a while as the data is going to have to be really bad for them to spend their last shot in terms of shock, awe and impact.

PERMALINK
Category: MacroNotes.

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

6 Responses to “Market rally”

Joey Says:
July 20th, 2010 at 3:46 pm
Peter
I rarely see anyone comment on your postings but just thought I’d chime in and say I find them useful.
Thx for the info.
Becky Says:
July 20th, 2010 at 7:50 pm
I came here to say exactly what Joey said! Peter, if you read this, I love seeing you on CNBC. You have an excellent handle on the market and I always value what you say. Thank you for participating on this blog.
beaufou Says:
July 20th, 2010 at 8:52 pm
Lend it to whom?
quiddity Says:
July 20th, 2010 at 8:57 pm
Me too. Always thoughtful.
JustinTheSkeptic Says:
July 21st, 2010 at 6:34 am
PB, ditto from here also.
Peter Pan Says:
July 21st, 2010 at 12:59 pm
“…this is the last bullet in the gun of the Fed…”

Why? Couldn’t they charge interest? (Didn’t Sweden’s CB do that?) Perhaps increasing this interest in increments until the desired effect (cough) is achieved?

Couldn’t they reload the QE bullet as well?