The Fed Effect
August 9th, 2006 by Grant in: EconomicsYesterday the Fed decided to take a siesta on interest rates, leaving the core rate at 5.25%. So the speculation continues. Will they leave the rate where it is for a few months, or continue with the quarter point hikes?
No one knows for sure, but it is clear the data from the economy will dictate the rate direction.
Energy prices continue to weigh on the economy, and the growth rate is cooling visibly. Unemployment is up, spending is starting to dip, and housing is moderating across the board.
Economists opinion on whether the Fed is done are widely varied, and until new data comes out as a result of the pause, I think any opinion at this juncture is purely based on speculation.
The only fear I have is whether or not the Fed stopped too soon. If the economy starts to turn up again, the Fed will be playing catch-up. If not, Bernanke will look like a genius.
Additional Information
How to Read a Fed Release
Read the Full Text of the Fed Release
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August 10th, 2006 at 12:19 pm
Nice comments on the Fed, and thanks for the “how to read a fed report” link. Very interactive and easy, although I think there are more details of the report that are left out.
In addition, reading the report leaves opinions open to broad speculation. Tom
August 10th, 2006 at 12:21 pm
I like the fact that Bernanke is basing his moves on the data, and I think these idiots that blurt out their reasons for the Feds next move are lacking important information to base their opinions on.
Rather than economic data, they are basing it on their wishes and emotion. Emotion will kill you in every market, the global economic market included.
August 10th, 2006 at 7:55 pm
One of the talking heads on CNBC (speaking to Melissa Francis, mmmmmm, Melissa Francis) actually said the Fed may hike BEFORE their next meeting. Hogwash. Doing that would turn our economy into that of Burkina Faso (it’s a pretty s*%&# country in West Africa).
Here’s a trading thought: buy a straddle on the Dow or S&P 5-10 minutes before the next announcement and close out the leg that doesn’t hit. Or, get a futures account going and place a breakout order on the miniDow 10 points above and 10 points below the market, at apprx 2:10pm ET. This has worked amazingly well the last 2 Fed meetings, as well as the jobs report last Friday.
August 11th, 2006 at 9:27 am
Sounds like you’ve got some experience trading futures, Winston?
In light of the recent terror events, raising the rate an additional quarter point would cripple the economy in my opinion. People need a little incentive to keep spending the money they have.
Thanks for contributing!
-Grant