William, since you are such a FAN of the Fed...(not)... thought you might enjoy this report...
New Show in Town - It?s Fed Watch
Tuesday, October 05, 1999 5:56 PM
by Jay Somaney
Move over Baywatch. There's a new show in town. It's called Fed Watch and its star is 72-year-old Federal Reserve Chairman, Alan Greenspan. Mr. Greenspan, in his infinite wisdom left rates unchanged (as was widely expected) but changed his bias to one towards tighter credit (taking some on the Street by surprise). The Federal Reserve's Federal Open Market Committee (FOMC) elected to leave the federal funds rate, (the overnight interbank lending rate) unchanged at 5.25%. However, the FOMC took on a bias favoring higher rates.
Immediately, thereafter, the Dow dropped over 100 points in a matter of minutes, squashing hopes of an early-October rally. From my perspective, nothing has really changed. The Feds were not going to raise rates today and they could not leave their bias at neutral since that could mean irrational exuberance in the markets all over again. And I think that towards the end of the session investors came to the same realization and some heavy buying took the NASDAQ back into positive territory and left the DOW slightly in the negative.
Going forward, I expect the Feds were merely trying to send the message to the market that there are still risks to the economy and inflation fears have not yet completely been put to bed. A tighter bias does not always mean that a rate hike is imminent at the next meeting (November 15, 1999), as there have been periods where the Fed has had a tighter bias and left rates unchanged. My bet is that the next set of economic indicators will really tell the true picture. The first economic indicator that I have my eye on is the unemployment report due out on Friday, October 8, 1999. This report will be followed by the PPI information next week (October 15, 1999) and the CPI on October 19, 1999. Those indicators will provide a clearer picture as to what the Fed decision might be at the next meeting. Until then, the markets could experience some volatility.
FWIW...I thought Kudlow was EXCELLENT in his assessment of the Fed this a.m. on CNBC...said it was 'anti-growth, anti-prosperity...etc,etc.."
Patsy |
