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The Fed won't change the rate, but if they switch focus from core inflation to headline inflation (including food and energy costs), the market could be in for a spill.
Submitted: Jun 27, 2007
Views: 294
Comments: 5
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View Article: http://www.thestreet.com/s/ahead-of-the-fed-elevation/markets/marke...
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Comments Received:
The market showed real strength today. I believe that the market is due for a correction. However, with today's strength, such a major tech event (the IPhone release) on Friday and end of the quarter rebalancing also on Friday, I don't think that the correction is coming quite yet, even if the Fed indicates that it is going to start raising rates again soon.
Posted: Jun 27, 2007
The Fed cannot raise interest rates and probably will cut. It needs to do something to prevent the housing market from declining further. I believe this is the story to watch for 2007.
Posted: Jun 28, 2007
I strongly disagree. Bernanke isn't going to use monetary policy to prop up an overextended real estate market. He views his primary responsibility as keep core inflation between 1 and 2%. It is close to 2% and he has no reason to cut until it gets below 1.50% or the US slips into recession.
Posted: Jun 28, 2007
It's interconnected. Core inflation is not going to rise if the housing market is falling. People view housing as part of their wealth and will cut back spending as the value of their homes fall. Plus, the drop in housing prices hits the finance, home renovation, retail industries hard. He doesn't need to raise rates because housing is dampening the economy for him. The question is whether the decline in housing will drag the economy down and cause the Fed to have to drop rates. There is no doubt that the Fed is watching the sub-prime crisis closely to see if this is going to spill into other markets. Their is no doubt they will act to prevent that from happening. The Fed does intervene when necessary.
Posted: Jun 28, 2007
Birdo
(Unregistered)
Wages are behind core inflation by 1%, Gas is up 30%,
energy 17.4%, Food 5%+. Most Americans live paycheck to paycheck, and have litle savings (401k's etc are not
liquid.) Real inflation is sucking the discretionary funds out of the economy at all levels. The housing declines are effecting large item discretionary purchases. Many people already have seconds on their home. Credit card rip offs by the banks raising rates from 9% to 28%+ when the consumer has never missed a payment, is wrong. They use a clause that 5 days makes you late, and then claim the US Post office did not deliver the check in time, even if its not true. Some large banks send out a late fee even though the check was cashed by the bank prior to the late date. If you call them, of course they will reverse the charges. % of people who bother to check the dates, guessing 30%. A million accounts x $30 fee x 70% = 21 million pure profit. No one is protecting the consumer from lending institutions or ridiculous interest rates on credit cards.
US companies doing well by generating profits abroad, lowering interest rates, handing out stimulus money, are all bandaids for a serious financial mess. Were in a recession and every one knows it at the consumer level. The Fed, and politicians should spend less time talking to the Cisco CEO, and more time surveying the middle class, and small business owners.
Posted: Feb 8, 2008
