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Realistbear

Fed Decision: 1815 G M T

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http://uk.biz.yahoo.com/29062006/323/fed-t...g-slowdown.html

Thursday June 29, 04:59 PM

Fed tries to crush inflation, risking slowdown

By Rob Lever

WASHINGTON (AFP) - The US Federal Reserve is looking to deal a crushing blow to inflation even if it chills the economy in the process, analysts have said anticipating another interest rate hike.
The Federal Open Market Committee, due to announce its decision Thursday at
1815 GMT
, was widely expected to boost its base rate another quarter-point to 5.25 percent, which would be the 17th consecutive rate hike.
A few analysts say the central bank under chairman Ben Bernanke
may make a bold half-point move
to send a signal and possibly give financial markets a long-awaited pause in the rate-boosting cycle.

Anyone think Ben will deliver a .50%?

What a totally different approach to inflation compared with Gordon's CPI-basket con-trick.

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I think a 0.25% hike is already factored in, but if it goes up 0.5% the markets may react badly. On the other hand they may see it as an end to the hikes and respond favourably. As George Bernard Shaw once said once said; "if all the economists were laid end to end they still wouldn't reach a conclusion". In other words, we'll only know when we know... And whether one thing or the opposite happens, it'll be for the same reason :rolleyes:

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Oooh it's that time of the month again.. :)

That'll put a 0.75% gap between us and the US. Will most likely be a 1% gap next time.

The markets will be looking to see what's in the policy statement though.. that'll determine whether there will be more, er, volatility on the stock markets.

At least America seems to be able to face up to having a HPC.

In Britain, the MPC, the Government are just a bunch of pussies who are terrified to upset the sacred British property market.

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13 minutes to go. :o

Adjust your watch RB ! We are currently in BST which is an hour ahead of GMT, so we'll hear the result in 1hr 13 mins. :D

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Adjust your watch RB ! We are currently in BST which is an hour ahead of GMT, so we'll hear the result in 1hr 13 mins. :D

I thought we still go by Greenwich Mean time! Has Gordon been moving the goalposts on time as well? <_<

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http://biz.yahoo.com/ap/060629/economy.html?.v=15

AP

Economy Zips Ahead Faster Than Expected

Thursday June 29, 12:17 pm ET

By Jeannine Aversa, AP Economics Writer
Economy Zips Ahead at a 5.6 Percent Pace, Fastest in 2 1/2 Years
WASHINGTON (AP) -- The economy sprang out of a year-end rut and zipped ahead in the opening quarter of this year at a 5.6 percent pace, the fastest in 2 1/2 years and even stronger than previously thought.

A .50% wouldn't appear to be overkill. Might have been worth a tenner on Betfair but .25% seems more likely along the lines of "measured" action that Al used to like. Gordon ain't arf going to have to pull his finger out in a few months to catch up as the world is passing him (us) by....................... :)

http://www.ndtvprofit.com/homepage/storybu...=n&id=31987

What next?

The markets have now fully priced in interest rates at 5.25 percent and there is an
88 per cent probability that rates will be hiked to 5.5 per cent in August.
The question now is what happens after that?
Edited by Realistbear

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Ben is at the desk shuffling papers and talking to Senators, reporters and invited members of the public as he prepares to make the announcement. President Bush and the Treasury Secretary have already beeen appraised of the decision. The atmosphere in the room is electric and you can almost hear the hearts pounding in anticipation of the next move in IR that will resound around the world. Many are shuffeling their feet nervously as they cast a fretful glance up at the clock and then back to Ben. Meanwhile, Ben looks cool, calm and collected as he responds to premature questions about how much the rate is going up--or down with a smile and a wink.

T minus 120 seconds and counting............................................. :)

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Fed Lifts Rate to 5.25%, Says Further Move Depends on Data

June 29 (Bloomberg) -- The Federal Reserve raised its overnight lending rate between banks by a quarter-point to 5.25 percent and said a further increase is data-dependent.

``The committee judges that some inflation risks remain,'' the Federal Open Market Committee said in a statement after a two-day meeting in Washington. ``The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.''

Chairman Ben S. Bernanke is trying to contain a jump in prices and inflation expectations without choking economic growth. The housing market is softening with applications for mortgages dropping to the lowest in more than two years and economists predict economic growth will slow from the first quarter's annual pace of 5.6 percent.

``He's got to try to establish his credibility and at the same time try to not overdo it on tightening,'' Paul Kasriel, director of research at Northern Trust Securities in Chicago and a former Fed economist, said before the decision.

The committee said ``recent indicator suggest that economic growth is moderating from its quite strong pace earlier this year,'' the statement said. ``Readings on core inflation have been elevated in recent months.''

The FOMC's unanimous decision lifted the overnight lending rate between banks by a 17th straight quarter point, from 5 percent, set at the last meeting on May 10.

Headed Higher

The streak of rate increases is the Fed's longest since the 1970s. The rate was 1 percent when policy makers started the current cycle in June 2004.

Traders placed about a 90 percent chance of an increase in August, based on the price of futures tied to the fed funds rate at the Chicago Board of Trade prior to the Fed's decision. Last week, Barclays Capital Inc. became the first primary dealer of government securities to raise its year-end forecast for borrowing costs to 6 percent.

``We believe the Fed will view these rates of inflation as `unwelcome,' and that it will want to see clear evidence that growth is slowing in a way that will ease inflationary pressures,'' Dean Maki, chief U.S. economist at Barclays, said in an e-mail this morning.

Global Phenomenon

The Fed's move keeps its rate the highest among the Group of Seven industrialized countries. At least sixteen central banks, including those of Thailand, Turkey and Colombia, pushed borrowing costs higher this month.

European Central Bank council members, including Yves Mersch and Nicholas Garganas, this week signaled the bank may step up the pace of rate increases to counter inflation. The ECB raised its benchmark rate to 2.75 percent on June 8, the third quarter point move in six months. Nine of 15 economists expect the Bank of Japan to lift its key overnight rate from near zero percent as early as July, according to a Bloomberg News survey.

U.S. consumer prices climbed at an annual rate of 5.2 percent in the first five months of the year, up from 3.6 percent at the same period in 2005. Minus food and energy, so- called core prices rose at an annual rate of 3.1 percent, from 2.4 percent increase in the first five months of last year.

Expectations of higher inflation, as measured by consumer surveys and bond market indicators, also rose in May.

Bernanke called the rise in inflation measures ``unwelcome developments'' in a June 5 speech and pledged that he ``will be vigilant to ensure that the recent pattern of elevated monthly core inflation readings is not sustained.''

`Very Tricky'

Fed officials are also trying to avoid a hard landing for the economy where high interest rates may restrain job growth and curtail spending. The average rate on a 30-year fixed mortgage jumped to 6.86 percent last week, the highest in more than four years, the Mortgage Bankers Association said yesterday.

``Bernanke is trying to do something very tricky here,'' trying to maintain the Fed's inflation-fighting credibility while avoiding ``overshooting,'' Dana Johnson, chief economist at Comerica Inc. in Ann Arbor, Michigan, said before the meeting. ``It's not clear that there's a path of short-term rates that can accomplish both things at the same time.''

Inflation-adjusted spending in March and April was the lowest since October last year. The prime lending rate, a benchmark for consumer loans, is likely to rise to 8.25 percent. The average price for unleaded gasoline is up about 30 percent from a year ago.

Fed officials used their two-day meeting this month to discuss their forecasts for growth, employment and inflation which Bernanke will present to Congress, starting with testimony before the Senate Banking Committee July 19.

To contact the reporters on this story:

Craig Torres in Washington ctorres3@bloomberg.net.

Last Updated: June 29, 2006 14:16 EDT

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Good on yer Ben. :D

That is .75% ahead of Gordon's Miraculously non-inflationary yet accomodative rate of 4.5%

http://biz.yahoo.com/ap/060629/fed_interest_rates.html?.v=9

The committee said that "some inflation risks remain" even though it was likely that a moderation in economic grwoth "should help to limit inflation pressures
over time
."
The Fed's rate hikes have raised the borrowing costs for millions of Americans on everything from home mortgages to auto loans.

"over time" Dovish? Allow time for rates to take effect.

Pound soaring on the news--up almost 200 points: 1 U.K. £ =

1 1.8216

DOW JONES INDUSTRIAL AVERAGE IN (DJI:^DJI) Delayed quote data

Index Value: 11,153.42

Trade Time: 2:25PM ET

Change: 179.86 (1.64%)

Prev Close: 10,973.56

Open: 10,974.36

Day's Range: 10,974.36 - 11,155.42

52wk Range: 10,098.20 - 11,709.10

The chart shows a vertical take off.

Edited by Realistbear

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Guest muttley

Indebted Americans are feeling the strain, according to Bloomberg.

Americans Want Fed To Stop Raising Interest Rates,Poll Shows

``There's a long history of the Fed being immune to public pressure,'' Valliere said. If bond investors believed the Fed was vulnerable to pressure, he said, ``it might cause interest rates to go up even higher, because the bond market would be very unforgiving.''

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Indebted Americans are feeling the strain, according to Bloomberg.

Americans Want Fed To Stop Raising Interest Rates,Poll Shows

Too true. Ben is not done yet it seems but we shall no doubt have the experts parsing "over time" for the next few weeks:

http://uk.biz.yahoo.com//29062006/94/fed-l...rter-point.html

Before Thursday’s decision, the futures market was pricing in a near
90 per cent probability that the Fed would hike again
in August, a sharp increase since the beginning of June.

DOW just snapped back 25 points:

DOW JONES INDUSTRIAL AVERAGE IN (DJI:^DJI) Delayed quote data

Index Value: 11,124.29

Trade Time: 2:30PM ET

Change: 150.73 (1.37%)

Prev Close: 10,973.56

Open: 10,974.36

Day's Range: 10,974.36 - 11,156.80

52wk Range: 10,098.20 - 11,709.10

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Sterling and the Euro are going skyward:

1 U.K. £ =

1.8261

1 Euro =

1.2639

Were the markets pricing in a .50% hike and Ben dissapponted or was the "over time" words that sent a dovish signal? US growth up 5.6% so there is no sign of a slowing economy and further hikes look certain. Seems that Ben's statement was a dovish signal but knowing how he gets his mords wixed.....................

http://www.marketwatch.com/News/Story/Stor...amp;siteid=mktw

Dollar falls sharply after Fed announcement

By Wanfeng Zhou

Last Update: 2:24 PM ET Jun 29, 2006

NEW YORK (MarketWatch) - The dollar slumped against the euro and yen after the Federal Open Market Committee lifted the fed funds target rate to 5.25% from 5%. The committee removed the phrase that some further measured policy firming "may" be needed and instead said that "any additional firming that may be needed" will depend on the economic outlook. "FOMC comments suggest that slower growth is still expected to moderate inflationary pressure going forward and seems relatively content that long-term price pressures remains contained. To be on the safe side though, they have left themselves an 'out' in which they indicate a data-dependent basis of any additional firming. This is a clear reduction in hawkishness," said Brian Dolan, director of research at Gain Capital. The euro was last up 0.6% at $1.2618, while the dollar was down 0.9% at 115.44 yen

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I think Ben has blown it.

Either way it doesn't matter. Prechter put it well when he said that all the really bad Central Bank decisions have already happened. There's not really a way out now without megapain, or hyperinflation followed by megapain.

You may be right. The dollar is tanking which will put up the cost of imports and add to the inflation woes. It will also dampen exports from the Eurozone where the recovery is still fragile. A mess.

Ben may try to clarify "in time" over the course of the next few days but he is in danger of losing credibility with his loose language.

1 U.K. £ =

1 1.8281

GOLD 06/29/2006 14:52 594.90 595.60 +8.80

Looks like inflation will rage and gold may do well. Up sharply on the Fed news.

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http://www.ft.com/cms/s/cf68ca6e-0791-11db...00779e2340.html

Soaring eurozone borrowing increases risk of rate rise

By Ralph Atkins in Frankfurt

Published: June 29 2006 18:23 | Last updated: June 29 2006 18:23

Soaring private sector borrowing and eurozone money supply figures on Thursday gave extra ammunition to European Central Bank hardliners in the battle against inflation ahead of next week’s interest rate setting meeting.
The latest data, highlighting the robustness of the eurozone’s economic upswing, will exacerbate ECB fears about the distortions caused by low interest rates. However, Jean-Claude Trichet, ECB president, has so far not given any indication that the central bank might step up the speed of interest rate rises.
The ECB was last night waiting to digest the US Federal Reserve’s latest statement.

You can bet Jean-Claude and the boys at the ECB are trying to work out what "in time" means but will probably continue hiking in any event given the overly accomodative IR and the imbalances that are emerging.

Gordon and his muppets at the BoE seem to be in complete and utter denial. Record borrowing in the UK announced today and not a word from Gordon or his lacky at the bank. Its scary.

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I think that the sliding dollar will continue force the Fed to keep raising Interest Rates, even though they don't really want to.

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Bugger , I really thought this was the start of a slide in the £ against the $ :(

Surely with a 0.75% differential in Interest rates & with no real signs of the UK raising rates Cable has got to fall off a cliff soon :ph34r:

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Could not agree more. Ben's "in time" words today were interpreted as in the long long term. No hurry etc. But what I think he may have mean't was the short term given the rapid changes in the economy with a red hot GDP growth number, undeterred housing market and the oil problem. I may be wrong, but I think there might be some selling tomorrow on the markets after everyone has had time to digest what Ben may or may not have menat. Uncertainty is never a good thing for stocks.

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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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