Sunday March 26 12:12 PM ET
Analysis: Bracing for a More Aggressive Fed
By Knut Engelmann
WASHINGTON (Reuters) - Better get ready for the big one.
If the roaring U.S. economy does not slow down very soon, the Federal Reserve may well decide to ditch its slow-motion policy of gradual interest rate rises and switch into higher gear, raising rates by more than the quarter-percentage point increments world financial markets have become used to.
Already, some of the Fed's top brass are pushing for higher rates in the face of torrid growth rates that few believe can be sustainable for much longer without a rise in inflation.
dailynews.yahoo.com
Where's the inflation?
So what's behind all the optimism in stocks? For one, inflation, with the exception of oil prices, still remains benign. Excluding volatile food and energy costs, prices rose a tame 0.2 percent last month. For another, market participants generally expect the Fed's five rate rises will work to slow the economy, ensuring inflation remains at bay down the road.
"At the moment there is not a broad-based systemic inflation problem bubbling up in the economy," said Joseph McAlinden, chief investment officer with Morgan Stanley Dean Witter Funds. "The Fed as a precaution has raised rates a little bit, will raise rates a little bit more but I don't think they are going to do a whole lot more after that."
cnnfn.com
I believe the interest rate/inflation debate is just beginning. I was already hearing CNBC debating the arguments Friday afternoon. More to come....
Jeff
angelfire.com |
