Mixed Messages - Interest Rate Hike Unclear
A: Don't read too much into todays released #'s because articles are saying one thing while the markets/experts are interpreting them in another way.
The big piece of data was the Core Inflation # excluding food and energy that came in at 2.1%, which MET wall street estimates. This is ABOVE the fed so called 'comfort zone' for this number which tends to be between 1-2%. So, its 0.1% above the comfort zone and some might argue that the fed is overly concerned about it. However, this 2.1% number did meet expectations and the street took the news positively as stocks are moving higher; basically the street felt relieved that this number wasn't higher!
If anything, today's report will tell the fed that inflation for the most part is CONTAINED thus far, and that a pause at the June meeting is a distinct possibility.
UrbanDigs Says: Its just too early to make any educated guesses right now. I'm still leaning towards a 1/4 point hike because as energy prices and precious metal prices remain high, inflation can trickle down at a later time; so the fed must be vigilant. Also, Bernanke MUST show that he is tough in inflation fearing times like Greenspan was. To do so means another 1/4 rate hike!
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Comments (1)
I think inflation is inevitable in this market. Especially with the rising energy and precious metal prices. This will be a good test for Bernanke going forward.
Posted by Chris Wright | May 29, 2006 7:42 PM