22 Sep 2006

Posted at 15:11h in The Friday Brief by
No one doubts the economy is slowing, but there is mounting debate as to how fast; will we get the “soft landing” that is hoped for or something more disruptive? Just a month or two ago the worry was that continued economic growth combined with tight labor might spark inflation. So far that has not happened. The most recent report of prices paid at the producer level released Tuesday showed a drop of .4%, well below expectations.

18 Aug 2006

Posted at 15:42h in The Friday Brief by
Back in mid July we suggested the Fed might pause at its August meeting. On August 8th they held their benchmark lending rate at 5.25%, while saying that consumer prices will “moderate over time” because of their 17 prior rate increases, surging energy prices and a cooling housing market. In the eyes of many the move was a bold one for new Fed chief Ben Bernanke. Inflation hawks (those who believe inflation is worse evil than slow economy) immediately criticized his decision as a gamble that could jeopardize the Fed’s credibility as an inflation fighter. Yet, as the data have come in, the decision seems all the wiser. Both the Producer Price Index and the Consumer Price Index showed that inflation unexpectedly dropped last month. Housing starts slid 2.5% last month for the fifth time in six months. And yesterday, Conference Board said its index of leading economic indicators dropped in July.

09 Jun 2006

Posted at 16:18h in The Friday Brief by
The Federal Reserve has increased rates by a quarter of a percent 16 times including their May increase without a major market drop, but one would think that the likely quarter point increase at the end of this month will be the straw that breaks the veritable camel’s (err bull’s) back.  Since that May 10th meeting the Federal Open Market Committee has become a ‘federal open mouth committee, as termed by one of our favorite economists, Ed Yardeni.  The mixed signals have rattled markets of all stripes, from stocks, to bonds, to commodities.