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It's Not Over Until It's Over, July 3, 2006
Summary: Fed Chairman Ben Bernanke might be his own worst enemy. It is extraordinarily difficult to communicate transparently with the market when future policy steps are uncertain and the market careens with abandon between polar extreme positions that the Fed is done to more rate hikes are coming and back again. Bernanke's best of intentions have not helped. Future Fed policy actions will depend on the pace of economic growth, especially job growth, as well as on inflation. I remain convinced that more rate hikes will be coming in due course.
Fed Chairman Ben Bernanke might be his own worst enemy. It is extraordinarily difficult to communicate transparently with the market when future policy steps are uncertain and the market careens with abandon between polar extreme positions that the Fed is done to more rate hikes are coming and back again. Bernanke's best of intentions have not helped. Future Fed policy actions will depend on the pace of economic growth, especially job growth, as well as on inflation. I remain convinced that more rate hikes will be coming in due course.
In fact, the Fed's press release is clear. Future rate hikes will be to contain inflation and will depend on the growing scarcity of resources. Strong economic growth that causes more labor scarcity will be met with higher interest rates before that scarcity pushes up costs that get passed along as higher prices. If growth slows sufficiently to...
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This section contains 422 words (approx. 2 pages at 300 words per page) |
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