Tomorrow (Tuesday) the Federal Reserve Board hold its May meeting and Chairman Alan Greenspan is likely to announce a quarter point hike in overnight interest rates bringing them up to 3%.
What he says about the state of the U.S. economy will give clues as to the future trend in rates.
At present, inflation is benign despite oil prices reaching $50/barrel but economic growth in the 2nd quarter has slackened off raising fears of possible 'stagflation' (the so-called Japanese disease).
The markets today were cautious ahead of the meeting with all 3 majors (Dow, Nasdaq and S+P 500) currently posting modest gains.
In the event of a rate hike the bond markets are likely to see a reduction in capital value and an increase in dividend.
The performance of stocks is more difficult to predict. Much will depend on what AG says at the meeting.
Federal Reserve Board Meeting
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Philadelphia Eagle
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Federal Reserve Board Meeting
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Federal Reserve Board Meeting
Philadelphia Eagle wrote: Tomorrow (Tuesday) the Federal Reserve Board hold its May meeting and Chairman Alan Greenspan is likely to announce a quarter point hike in overnight interest rates bringing them up to 3%.
They do prefer not to spring surprises, don't they:
Associated Press wrote: Most of the statement that accompanied the latest rate move was largely unchanged from the Fed's March 22 meeting, although the central bank did express more concern about inflation and acknowledged that higher energy prices are starting to slow spending growth. Neither was enough for the Fed to abandon its approach to rate hikes, but investors had hoped for more news on economic growth in the face of an apparent slowdown in growth.
"The Fed is becoming somewhat more conservative and hawkish with respect to inflation issues," said Jack Caffrey, equity strategist for J.P. Morgan Private Bank. "People were thinking that Fed would address the economy, maybe be a little more flexible on rates to allow the economy to get over the slowdown, but they obviously aren't as concerned about that."There seems to be very little discussion of the effect of the dollar devaluation vis-a-vis Europe over the last six months. I'd see that as intrinsically inflating, if only from the rise of dollar-linked raw material prices as exporters get more for their goods in non-US markets.
None of this is anything like as damaging as China/Japan moving their reserves out of US currency, of course. Would anyone like to depend on continued good-will from that direction? I think they're just waiting for the nastiest moment before they start making noises that way.
They do prefer not to spring surprises, don't they:
Associated Press wrote: Most of the statement that accompanied the latest rate move was largely unchanged from the Fed's March 22 meeting, although the central bank did express more concern about inflation and acknowledged that higher energy prices are starting to slow spending growth. Neither was enough for the Fed to abandon its approach to rate hikes, but investors had hoped for more news on economic growth in the face of an apparent slowdown in growth.
"The Fed is becoming somewhat more conservative and hawkish with respect to inflation issues," said Jack Caffrey, equity strategist for J.P. Morgan Private Bank. "People were thinking that Fed would address the economy, maybe be a little more flexible on rates to allow the economy to get over the slowdown, but they obviously aren't as concerned about that."There seems to be very little discussion of the effect of the dollar devaluation vis-a-vis Europe over the last six months. I'd see that as intrinsically inflating, if only from the rise of dollar-linked raw material prices as exporters get more for their goods in non-US markets.
None of this is anything like as damaging as China/Japan moving their reserves out of US currency, of course. Would anyone like to depend on continued good-will from that direction? I think they're just waiting for the nastiest moment before they start making noises that way.
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When flower power came along I stood for Human Rights, marched around for peace and freedom, had some nooky every night - we took it serious.
Who has a spare two minutes to play in this month's FG Trivia game! ... My other OS is Slackware.
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Philadelphia Eagle
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Federal Reserve Board Meeting
Yes Spot - you make some very valid points.
Alan Greenspan is not exactly the most exciting person around although his comments (always assuming you can understand what he's saying!) are pored over by all sorts of financial correspondents trying to work out what his real thoughts are.
You're right on the dollar value against the Euro - it is potentially inflationary but so far that specter hasn't raised its ugly head for a while and remains fairly benign. That's one reason for the Fed's 'measured' hike in interest rates. It's the eighth in a row!
China/Japan - As you say I don't think most people would depend on them for too much friendly action. We and I think also yourselves have a major problem with China in terms of outsourcing and imbalance of trade.
Both countries own substantial U.S. debt so they can't, in their own interests, stand by and watch over aU.S. economic deterioration which would hurt them as much as it would us.
It is to be hoped that they see that and act responsibly.
How is it seen from a UK perspective?
Alan Greenspan is not exactly the most exciting person around although his comments (always assuming you can understand what he's saying!) are pored over by all sorts of financial correspondents trying to work out what his real thoughts are.
You're right on the dollar value against the Euro - it is potentially inflationary but so far that specter hasn't raised its ugly head for a while and remains fairly benign. That's one reason for the Fed's 'measured' hike in interest rates. It's the eighth in a row!
China/Japan - As you say I don't think most people would depend on them for too much friendly action. We and I think also yourselves have a major problem with China in terms of outsourcing and imbalance of trade.
Both countries own substantial U.S. debt so they can't, in their own interests, stand by and watch over aU.S. economic deterioration which would hurt them as much as it would us.
It is to be hoped that they see that and act responsibly.
How is it seen from a UK perspective?
America the Beautiful :-6
website - home.comcast.net/~nmusgrave/
website - home.comcast.net/~nmusgrave/