Thursday, November 8, 2007
Fed in a Bind
Gentle Ben Bernanke was on the Hill today, testifying to the Joint Economic Committee. The text of the speech pointed to downside risks remain in the economic outlook, but upside risks to inflation given higher commodity prices and a weaker dollar. What this means is what traders fear the most, can the Fed lower rates to stimulate growth while not causing inflation to shoot higher? Today, the market is emphatically answering "NO," while the market sells off. The market now fears a Fed sandwiched between the rocks, with no where to go. They cant fight back against the slowing economy and fallout from the housing crisis with rate cuts, for fear of stoking higher prices and runaway inflation. Therefore, they are stuck in a bind, can't do a thing, and the result could be an economy that falls off a cliff. The stock market will take a hit if that is the end result. Good luck.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment