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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: patron_anejo_por_favor who wrote (70031)9/20/2006 8:02:39 PM
From: CalculatedRisk  Read Replies (1) of 110194
 
Professor Duy's Fed Watch: Unsatisfying
economistsview.typepad.com

Excerpt:
Like almost everyone, I was expecting policy to remain essentially unchanged at the conclusion of today’s FOMC meeting. Still, I was left unsatisfied by the accompanying statement, posted by Mark Thoma. At best, its brevity makes it look straightforward. At worst, it looks like something cobbled together because FOMC members were unable to reach a uniform opinion on the state of the economy.

First, note the single sentence paragraph describing the state of the economy. In August, the FOMC concluded that “growth has moderated.” That was a definitive conclusion about the state of activity. Now the “moderation appears to be continuing. [emphasis added]” Not so definitive, and suggests that not everyone on the FOMC believes that the second quarter slowdown will intensify or even continue – despite the growing housing slowdown, which they acknowledge by dropping the “gradual” modifier. Moreover, they only mention the housing slowdown in explaining why the economy “appears” to be moderating. If that was the only factor they are looking at, wouldn’t you expect a more definitive forecast? As Jim Hamilton reminds us, you can’t exactly miss the relationship between housing and recessions. If housing is your focus, cut rates now! They didn’t cut rates, so there must be more. So where is the rest of their analysis? What are the factors that offset the housing slowdown? Inquiring minds want to know.

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