Tuesday, December 12, 2006
No Surprises From The Fed
I'm back a bit early from daytime appointments. Our initial take on the Fed statement is that it shows the Fed remains boxed into to effectively taking a neutral stance. What else can it do? It doesn't dare raise interest rates lest it completely aggravate the condition of the housing market already on life support in some parts of the country and it certainly doesn't want to lower rates now given the condition of the dollar and the reality of inflation pressures. So it just stands pat for a 4 meeting in a row. The Fed today did further acknowledge the seriousness of the housing slowdown by adding the modifier "substantial", and there is no doubt that the "substantial" housing slowdown due to the popping of the Greenspan credit bubble will eventually force the hand of the Fed to address an ugly economic scenario at some point next year.