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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: marc ultra who wrote (5390)5/26/1999 3:33:00 PM
From: Ian@SI  Read Replies (3) of 15132
 
Marc,

I think the Fed will remember their last preemptive 25bp hike better than you seem to. It led to the global currency crisis precipitated by the LTCM fiasco.

I doubt that the Fed will want to take that chance ever again.

Their role, mandated by law, is to, in part, promote domestic economic growth. They are also mandated to promote price stability.

Their role, is not to fight irrational fears of inflation - i.e. Fears of exactly the opposite result repeatedly shown by every direct measure of inflation.

And their recent experiment at jawboning (i.e. - immediate announcement of the bias change) has shown itself to be far more effective at scaring the bond traders than any real rate hike ever was.

So the Fed seems to have achieved the objective for slowing the wealth affect without taking any rate action whatsoever, while still preserving their ability to tighten, ease or do nothing. The only thing that has changed is the Street's awareness of the Fed's presence.

JMHO,
Ian
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