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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (25847)	3/18/2005 6:06:25 AM
From: zonder	Read Replies (1) \| Respond to of 116555

I doubt if faith has anything to do with it. Your understanding, if I got that correctly, seems to be that world growth is slowing and yet most major economies are on a hiking spree or getting there. Meanwhile, oil is making all-time highs, baltic dry index is hovering above 4,500, and inflation is on the rise pretty much everywhere that matters. According to your view of the world, central banks hiking interest rates must be lying, misguided, or possibly just incompetent. Do you see a discrepancy in this world view at all? The only way you can hope to sustain this view is the assume that you know best and all central banks around the world are run by morons. Otherwise, you need to accept the possibility that you might be missing something. How about this: US interest rates have been negative in real terms for quite a while and it is entirely normal that they should be increased at this cycle of economy. It would be irresponsible bordering on criminal if they were left at such overly accommodative levels. EU inflation at 2.4% is a very normal level. It is nowhere near deflationary levels and any such comparison to Japan has no validity. ECB rate of 2% is negative in real terms, and so are the short term maturities. That means an overly accommodative policy that needs to be removed as signs show that the trough is behind us, and that is obvious whatever data you look at - employment, GDP, inflation, etc. As a result, ECB is giving signs that they will probably be raising rates IN SIX MONTHS. That sounds very sensible to me, given the current data. As I said, faith has nothing to do with it.

To: mishedlo who wrote (25847)	3/18/2005 7:31:02 AM
From: zonder	Respond to of 116555

US outlook: Lehman revises its outlook: "The economy appears to have started 2005 with more momentum than anticipated. We are revising growth higher in both Q1 and Q2 to 4.5 and 4.0 respectively, from 3.7% in each quarter. The stronger pace of activity seems fairly evenly balanced consumption, business investment, and housing are all proving stronger than expected. In addition, we have penciled in another Fed rate hike, bringing the year-end funds rate to 3.75% from 3.50% previously. We expect the Fed to maintain its steady 25bp course through each of the next 5 FOMC meetings (20 September)." Provided by: Market News International