Rob,
<<we believe the odds are greater than 50% that the economy has slipped into recession, and we expect that GDP will contract in both the second and third quarters. It is, therefore, as close to a certain call as there can be that the Fed will out interest rates by a further 50 basis points at the May 15 policy meeting. We also expect that there will be an additional 100 basis points of rate cuts by the middle of the third quarter.>>
Whew, he seems to be assuming that a recession is in the bag, and that the Fed sees it just like he does. Wasn't Angell the same man who a few months said that the Fed would drop rates, then they didn't, and back in April said that they wouldn't drop rates, and then they did?
I'm not sure that dropping rates as quickly as the Fed is doing it is doing as much to help a lot of consumers as perhaps AG would like. Joblessness and fear of joblessness tends to lead people to keep their wallets in their pockets. Long term rates and, more importantly for most consumers I think, mortgage rates haven't fallen nearly as much as short term rates, the yield curve just gets steeper and steeper. Would appear that bond buyers fear inflation with this drop in rates, though if we are header for recession that doesn't make much sense unless it turns into stagflation, which also doesn't make much sense to me given the slack capacity utilization and overseas manufacturing.
The higher long term rates also make no sense since so many people claim that they believe that there will be a shortage of long term Treasuries developing over the next few years. Of course if people are looking at the way the Bush tax cuts are structured and if they believe that the combination of these tax cuts and a recession will lead us back to deficits over the next couple of years, maybe it makes more sense that long term bonds are weak.
Yeah, yeah, I know, Republicans are the fiscally responsible party, deficits would never occur on their watch, would they?
Sam |
