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Fed Looks Certain To Keep Raising I R Beyond Expectations

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http://personal.fidelity.com/research/stoc...ketsindex.shtml

Data leave Fed little breathing room on rates

09:35 a.m. 04/04/2006 By Dr. Irwin Kellner Provided by

Commentary: Signposts point to more Fed rate hikes
HEMPSTEAD, N.Y. (MarketWatch) -- The great economist, John Maynard Keynes, once said that if you want to pick the winner of a beauty contest, don't pick the contestant you think is the prettiest -- choose the one you think the judges will deem the prettiest. The same goes for the Federal Reserve.
In this case, the contest involves figuring out how many more times the Fed will raise interest rates.
Don't look to new Fed head Ben Bernanke for any clues. Bernanke's the quintessential two-handed economist. His recent speech before the Economic Club of New York was replete with our stock phrase, "On the one hand ... on the other."
No, Virginia, you're going to have to do some homework if you want to scope out the Fed. You're going to have to study the indicators the Fed's busy studying if you are to have any chance at all at guessing when the central bank's policymakers will call a halt to its 21-month regimen of rate hikes.
This is especially important now that monetary policy's no longer pushing the economy ahead.
The real, or inflation-adjusted, federal funds rate, at 2.95%, is well above its long-term average of 2.62%. Meanwhile, the yield curve's flat, while spreads between corporates and Treasurys as well as between low- and high-quality bonds are widening.
As you might have suspected, the money supply's growth rate has slowed dramatically. In 2003, it was 8%; it's half that rate today.
Antennae up
To say that Fed policy is data-dependent from here on out is nothing more than stating the obvious. The question is: Which data does the Fed deem most important?
We know that the Fed's worried about the rate of inflation flaring up. But the price indexes, themselves, are lagging indicators. To get an idea how much inflation lies ahead, the Fed's no doubt monitoring how much spare capacity is left in the economy.
There are two gauges of economic slack. One deals with the labor force, the other with industry.
Although imperfect, the unemployment rate is a pretty good guide to the state of the labor market. And at 4.8% in February, the nation's jobless rate is hovering at six-year low, with jobs in a growing number of fields going unfilled.
As for industry, the Fed's own measure of capacity utilization stands at just under 81%. This is the highest rate since 2000 -- just before the onset of the last recession.
Just to be sure, the Fed probably looks at prices of industrial raw materials. These are jumpy, but when a trend is discernible -- their prices have jumped 70% in the past four years -- they're worth paying attention to.
These key measures point to one inescapable conclusion: The Fed isn't through raising rates. Not by a long shot.

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http://personal.fidelity.com/research/stoc...ketsindex.shtml

As you might have suspected, the money supply's growth rate has slowed dramatically. In 2003, it was 8%; it's half that rate today.

These key measures point to one inescapable conclusion: The Fed isn't through raising rates. Not by a long shot.

good-oh!

erm - one thing i don't get is the bit about the money supply. i thought the US was printing like crazy and pumping mind-blowing amounts of liquidity into the system/hiding the M3 figures etc etc... :huh:

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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