Posts filed under “Inflation”

Fed Minutes

The Fed announced their plans today to
“only invert the Yield Curve somewhat,” rather than the deeper and more
extensive inversions some traders feared.

The minutes revealed a debate between the
two camps: The Hawks wanted to invert the Yield curve extensively, while
another, more dovish group only wanted to see the flat curve inverted more
moderately.

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UPDATE:  January 4, 2005  6:13am

Front page WSJ article states "Fed officials are less worried about inflation and thus may be nearing an end to their campaign to raise rates, minutes of their December meeting suggest."

Joanie has a very different take on both the minutes and the markets reaction:

"I read it in its entirety.  Quite boring, as a matter of fact; nothing new at all.

They say that the economy is on solid ground across the board, the only slight slippage mentioned at all was a mention of a bit of cooling in housing. Employment and output are right up there and inflation, of course, remains in check.

The minutes go on forever, rehashing a lot of stuff we have known for eons. Some think we need more tightening, but there is no consensus as to how much. Bottomline, they are monitoring the data carefully. And will act accordingly.

Look. We knew all that; a couple or so more and finito. I found the minutes totally uninspiring and lacking in any detail that is not already well hashed out in the press.

HOWEVER:  The tape says that they were dovish.

But here’s the biggest question of all:  It took me a solid 20 minutes to read that junk all the way through as it doesn’t quite read as easily as the Daily News.  So can you please tell me how they put the pedal to the metal at precisely 2 p.m.?  I mean, you couldn’t even get on the website to read it that fast.

Bottomline:  Earlier, we came within .30 of putting in a Oitside Down Day.  They rallied here because they could. The minutes are the excuse."

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation

A World of (mostly) Flattening Yield Curves

Category: Economy, Federal Reserve, Fixed Income/Interest Rates, Inflation

Gold & The Wizard of Oz

Category: Commodities, Federal Reserve, Inflation

2 Studies on the Flattening Yield Curve

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation, Technical Analysis

Explaining Yield Curve Inversions

Category: Economy, Federal Reserve, Fixed Income/Interest Rates, Inflation

Inverted Yield Curve: Its different this time (not)

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation, Technical Analysis

Economists React to Fed

WSJ 

The Federal Reserve, as expected raised interest rates for the
13th consecutive time Tuesday, lifting the federal-funds rate by a quarter
percentage point to 4.25%. The central bank suggested it would raise rates
again, but also hinted that it is less certain on its future rate actions than
it has been in over a year. In the accompanying statement, the Fed said growth
remained "solid", inflation excluding food and energy prices had "stayed
relatively low," and inflation expectations were contained. But it also warned
that the possibility of further erosion of spare productive capacity and high
energy prices "have the potential to add to inflation pressures."

What do
economists and other analysts make of the changes? Here’s a sample of their
commentary:

* * *

The Fed has finally taken the step that we have been
pointing to for a while, in separating the two concepts of reaching neutrality
and finishing the rate cycle. They kept "measured," as we thought they might,
but now it refers to "some further measured policy firming" as opposed to
removing accommodation at a measured rate. So, rather than being on automatic
pilot in raising rates toward neutral, the FOMC now sees itself in the second
stage of the rate hike cycle — further moves will be perceived by Fed officials
as taking policy toward a restrictive stance.

– Stephen Stanley, RBS
Greenwich Capital

* * *

The message from the FOMC appears to be that barring a
major change in the tone of economic data, another 25bp tightening move will be
implemented at Chairman Greenspan’s last meeting on January 31. At that time, it
is quite possible that the "measured phrase" will be jettisoned, leaving
incoming Chairman Ben Bernanke with a clean slate for the next meeting on March
28. Our own view remains that the evidence concerning economic growth should be
sufficiently strong in coming months to spur another three 25bp tightening
moves, lifting the Fed funds target to 5.00% in the second quarter of the year.
We think that growth will then be moderating sufficiently for the FOMC to cease
tightening, even if core inflation drifts up mildly from its current
levels.

– Joshua Shapiro, Maria Fiorini Ramirez Inc.

* * *

The Fed announced: "Core inflation has stayed relatively
low in recent months and longer-term inflation expectations remain contained."
Quite frankly, we do not believe them. We know that beyond the rises in food and
energy prices, nearly everything — from healthcare to building materials to
education costs to insurance to commodities — costs more. And gold, the world’s
best inflation indicator, is well over $500 per ounce. Where ever we look, we
see evidence that prices have limited stability and an upward bias.


Barry Ritholtz, Maxim Group

* * *

 

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Category: Economy, Federal Reserve, Inflation

What Data is the Fed Watching?

Category: Economy, Federal Reserve, Inflation

Gold Yearly Data Analysis

Category: Commodities, Inflation, Technical Analysis

Headlines versus Underlying Data

Category: Commodities, Data Analysis, Earnings, Economy, Inflation, Real Estate, Retail