30 Jun 2006

Posted at 16:16h in The Friday Brief by
The Federal Reserve raised their benchmark interest rate for the 17th consecutive time yesterday which was a surprise to no one.  But in a surprise to many, they suggested for the first time that a pause might be coming soon.  Their statement said “the extent and timing of any additional” rate increases “will depend on the evolution of the outlook for both inflation and economic growth.” Stock markets surged on the news.  The Dow Jones Industrial Average soared to close 217.24 points higher than when the statement was released, a gain of about 2% - its best day in more than three years. The NASDAQ Stock Market was up 3%, its biggest one-day rally since March 2004. Long-term bond yields edged down as prices rose.

23 Sep 2005

Posted at 16:36h in The Friday Brief by
If they were considering a pause in their relentless rate increases the Federal Reserve Governors missed a great opportunity to both assess the effectiveness of past increases as well as to show a little social empathy.  They called Hurricane Katrina's economic disruption only temporary and made no mention of the potential economic cost of Hurricane Rita as it raced toward the heart of the nation’s oil, gas, and gasoline production facilities.  Instead of pausing they raised the federal funds rate by a quarter percentage point to 3.75%.  The increase marked the 11th time since June 2004 and the longest sustained tightening campaign since 1977-79, when the Fed was fighting runaway inflation.

02 Sep 2005

Posted at 16:39h in The Friday Brief by
Our prayers are with those who suffer on the Gulf coast from the destruction of Hurricane Katrina and those who are there to help them.  While there is significant coverage of the sensational events stemming from the darker side of human nature, the larger and more important story is of the suffering of thousands who have lost everything and of the efforts of thousands more who are there to help them.  Once again, we have an opportunity as to people to come together to help our fellow citizens and be an example to the world.  Perhaps the greatest challenge so far has come from the Reverend Franklin Graham as he calls on churches throughout the country to invite some of those homeless into their homes and to help them get them back on their feet. 

20 May 2005

Posted at 16:08h in The Friday Brief by
Recent economic signs point to the fact that the Fed may be close to accomplishing its goal to slow the economy enough to keep inflation under control.  There are also signs in the bond markets to indicate that investors think rates are high enough.  Don Hays observes that the short-term money markets (the 90-day T-bills) have consistently anticipated the Fed’s rate hikes for the past year as they hovered just above the Fed Funds rate (set by the Federal Reserve policy board).  In the last few weeks, however, the T-Bill has resisted following the Fed Funds rate higher.  As pointed out last in last week’s Brief, commodity prices have shown signs of topping out.  Money supply growth is slow, industrial production lately weaker, and regional Fed manufacturing surveys are showing weaker activity.