Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: zonder who wrote (17541)	12/3/2004 1:44:41 PM
From: mishedlo	Read Replies (4) of 116555

So, why is it so shocking to you that Fed keeps raising rates, I wonder... I am not shocked, nor was I shocked in Nov. The only thing I am shocked about is the strength of consumer spending. No doubt it has been and continues to be fueled by cash out refis. as for the other stuff it is quite clear the fed targets other data than inflation. If they only targeted inflation, rates would never have gotten to 1% would they? My position on oil is not off base either. You keep pointing out the PPI but oil is a large part of it. The FED itself ignores energy prices from its decisions (except as a way to LOWER growth estimates and spending estimates). Finally, the FED just stated that they do NOT target numbers they target their expectations. That is a HUGE difference between what they do and what Trichet at the ECB does. Bernanke commented on this just yesterday. Yellen has been giving repeated hints that the Fed might pause. Paul Kasriel at Northern Trust expects the FED to pause if job numbers are bad. Maybe he changes his tune today maybe not. We will find out later today I think. Paul Kasriel has been watching the Fed for 18 years. He is not a dummy. As long as the stock market and housing and CPI numbers come in hot, the FED will keep hiking. IF their perception changes and they are worried about jobs and housing they will stop hiking IMO. They fed did not start its hiking cycle UNTIL jobs improved. They stated jobs as a reason in fact. If the FED is watching jobs for Christ's sake, why is it not logical for me to watch jobs? Once again you seem more familiar with the ECB's simple rule: target inflation to 2%. The ECB does not watch jobs, balance of trade, unemployment or anything else. Perhaps you think the FED should not watch anything else either. The fact is they do. And the fact is they are damn concerned about lots of things including housing (which is the only thing keeping this economy together) BTW my position is that the FED will hike SLOWER than what is priced in. That is not the same as expecting no hikes. Mish

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