Posts filed under “Federal Reserve”
Greg Ip, whom I have criticized in the past for being too trusting of government statements and news releases, has the scales removed from his eyes:
Fed pause coming and this time, we mean it — right?
Did Bernanke hint at a pause in rate increases in his Congressional testimony this week? The markets certainly think so, but a reality check might be in order. We checked our coverage of the last seven months and concluded that since the Fed started hinting of a pause, it’s raised rates four times. Here are The Wall Street Journal’s headlines in that period:
Dec. 14: Neutral Point May Be Near As Statement Leaves Room for a Pause in the Increases
Jan. 4: Fed Suggests It’s Close to Ending Run of Rate Rises
Feb. 1: Fed Lifts Rate by Quarter Point, Casts Doubt on More Increases
April 19: Fed Hints Next Rate Increase Could Be the Last for a While
April 28: Bernanke Hints at a Pause in Rate Increases
May 11: Central Bank Cites Worries Of Inflation Amid Growth, But Hints of a Possible Pause
July 20: Dow Surges as Markets Take Fed Chief’s Remarks as Hint Rate Increases Are Near End
To be sure, those were just hints — the Fed never said when, or whether, it would pause, and some of those hints clearly applied to a period beyond the next meeting.
That said, the fact there has been no break in the tightening cycle in spite of all the hints to the contrary serves as a useful reminder that no matter what the Fed says, or what we think it says, circumstances change, and the Fed must act accordingly.
Better watch out, Greg — they’ll brand you a cynic if you keep up that reality based stuff . . .
Fed Reality Check
WSJ, July 20, 2006, 9:45 am
"AS WE WERE SAYING BEFORE WE WERE SO rudely interrupted by a man dressed in a white smock and wielding a scalpel (thank heavens he left his box-cutter at home), the stock market looks a bit worse for the wear."
So says Barron’s Alan Abelson, usually one of Wall Street’s most visible Bears. Just his luck — or was it the Trading Gods having some fun? — that he managed to be out of service for the most bearish period in 3 years. Traders, being a superstitious lot, will soon be begging Abelson to "let us know the next time you go in for a procedure" – so they can get short.
Regardless, whatever the man dressed in a white smock removed, it wasn’t his arch sense of humor or acid tinged tongue:
"The impact of the massive disturbance was global in every sense: Not only were its terrible tremors felt far beyond the narrow canyon of capitalism in lower Manhattan, but they commanded notice in quarters much loftier than trading floors or commodity pits. We’ve not the slightest doubt, for example, that what prompted the famed cosmologist Stephen Hawking early last week to urge earthlings to create settlements in space was, pure and simple, fear of the effect of crashing markets on the human race."
But the key to Abelson’s return is his clear eyed take on inflation, which comports squarely with our own views:
"FOR OPENERS, OUR HUNCH IS THAT MR. BERNANKE’S concerns about inflation, despite his mucking up the message with all that rubbish about inflationary expectations, have more than a modicum of merit. And our conviction on this score is only strengthened, of course, by the fact that so many pundits pooh-pooh inflation as a problem. Indeed, if anything, we fault the chairman for his evident sympathy with the argument that the fearsome upward spiral in the price of crude, so far, anyway, hasn’t been exerting all that much impact in the economy at large.
Apparently, Mr. Bernanke, like his critics, needs to get out more. Oil is a very sneaky commodity. Our old friend and revered Barron’s contributor, Abe Briloff, likes to describe certain stealth accounting practices as comparable to a bikini: what they reveal is interesting, what they conceal is vital. Oil is something like that: Its uses are readily manifest, but it plays a far bigger and more critical role in our lives than is easily perceived.