Morning J.T.,.Re:. FED and/or raising rates sooner, later or next year?
My guesses aren't too accurate when it comes to the Fed.<g> I didn't think they would change the bias so soon after we bombed the Chinese Embassy but they did. Apparently, AG has a couple of strong inflation hawks on the board to contend with; otherwise, I would have bet they'd wait to see the May CPI which will be released on June 16th.
For sure we're not facing wage pressures as evidenced from the Fed charts but we continue with tight labor markets. But materials prices are apparently rising based on demand. I think demand is the cause since commodity prices are still low. This demand is what seems to be worrisome for the Fed according to the First Union economic analysis. Still, AG admitted in his May 4th speech that economists are routinely wrong when it comes to forecasting growth so that's why I thought maybe he'd wait for solid evidence.
Apparently the market is already pricing in a 25 basis point tightening though.
U.S. 2-yr yield soars above 5.5 pct, 12-month high
biz.yahoo.com
NEW YORK, June 1 (Reuters) - The U.S. Treasury two-year note broke above the 5.5 percent yield level for the first time in a year on Tuesday, indicating the market expects the Federal Reserve to hike rates at its upcoming policy meeting later this month.
Another reason to consider that we are not going to have inflation as in the past is because of the greater efficiencies with which capital is deployed. Also, gold is apparently fairly closely correlated with interest rates. John Bollinger did a study which showed a 0.65 correlation and he characterized it as statistically significant. TYX lags gold by about 9 months.
bigcharts.com
Sorry about the length of reply, <g>
Cheers,
Lee |
