January 3, 2006

SPEAKING OF PASSING THE MIDTERMS:

Rate futures up on Fed minutes, focus on Bernanke (Ros Krasny, 1/03/06, Reuters)

"Some economists argue that Bernanke must tighten to prove his toughness. But the Fed is already setting him up for an option, by arguing that from now on, future policy depends on 'economic developments,'" said Chris Low, chief economist at FTN Financial in New York.

The U.S. central bank has raised rates in one-quarter percentage point increments 13 times since mid-2004, pushing the fed funds rate up from a low of 1.0 percent.

At the December meeting the Fed dropped its reference to policy being "accommodative," suggesting to the market that rates have entered a neutral zone that neither supports nor stymies economic growth.


Ten reductions by November would get rates back where they should be and increase GOP majorities in both houses.

Posted by Orrin Judd at January 3, 2006 4:32 PM
Comments

. . .and today the market soars by 130 points.

Posted by: obc at January 3, 2006 7:31 PM

The yield curve is pretty flat all the way out to the 10 yr. So either inflation expections will have to increase significantly or the Fed needs to start cutting rates to create a more normal upward sloping yield curve.

Posted by: AWW at January 3, 2006 10:42 PM

I'd love to see Greenspan go out with a thud.

Posted by: erp at January 4, 2006 10:50 AM
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