Fed's Kroszner: Rough Patch Won't Warrant More Rate Cuts
A: A breath of fresh air! Hot off the presses as Federal Reserve Governor Randall Kroszner is in New York this morning discussing the state of the current economy, threats, inflation, and monetary policy. While I said in a post back on Nov 5th, that I thought we would get a surprise rate cut before year end, dedicated readers of this site know that is not what I wanted.
According to Bloomberg.com:
Federal Reserve Governor Randall Kroszner said economic indicators in the coming months will reflect a "rough patch" though that wouldn't be enough to warrant additional interest-rate cuts.Fed Governor Kroszner is a voting member of the FOMC in setting monetary policy, and serves as the fed board's liaison on bank regulation."The current stance of monetary policy should help the economy get through the rough patch during the next year, with growth then likely to return to its longer run sustainable rate," Kroszner said in a speech in New York. Data consistent with such growth "would not, by themselves, suggest to me that the current stance of monetary policy is inappropriate."
The comments represent the most explicit message from a Fed policy maker since the Oct. 31 rate cut that officials are reluctant to lower borrowing costs further. "The downside risks to economic growth now appear to be roughly balanced by the upside risks to inflation," Kroszner said, echoing the Federal Open Market Committee's Oct. 31 statement. "I would add that the limited data and information received since the October FOMC meeting have not changed my thinking in this regard."
ADD ON @ 9:57 EDT --> You know, this very well could be the fed desperately trying to regain control over the markets! Fed funds futures were pricing in 117% chance of a rate cut at the next fed meeting. That means they are expecting 100% chance of a 1/4 (25 basis points) ease + 17% chance of another 1/4 point ease after that. Its clear that the fed wants to eliminate the markets expectations of future moves that pin the fed into a corner come decision day; as if they don't deliver it will be a shock to the tradable markets.
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