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Technology Stocks : E Loan Inc -EELN
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To: stockman_scott who wrote (572)8/10/1999 7:03:00 PM
From: Kelvin Taylor  Read Replies (2) of 817
 
"The FOMC will convene again on August 24 amid market expectations of another quarter-point funds rate hike largely fueled by rising wage pressures."

This will be the reason given why the Fed will raise rates this month.
The real reason? The Fed(maybe not all the voting members) believe the stock market is overvalued by about 40%. A continuing rise in equity prices gives more confidence to consumers thus spending increases will eventually turn inflationary. The REAL reason behind higher rates is to simply cool-off the rapid rise in the market. Slow down the market, they believe, will then slow spending and thus cool-off the economy.

I totally disagree with this assessment because the Fed has no jurisdiction in the free markets. Markets determine prices not the government. But if true then the Fed is not finished with rate hikes.

One opinion I heard today was the market expects a rate hike in August, it's already factored in, it's the 3rd rate hike that might be coming. The argument is the 3 rate cuts last year are going to be retrieved because foreign economies are in better shape.

The Fed. would not raise rates in an election year so the deed will be done this year.

Will we see just one more hike or two? That's the question yet to be answered. The market hates uncertainty so until the facts are known expect more of the same.

I'm now finish with my economic dissertation for today :o)

Kelvin
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