Tuesday, Jun 06, 2006

Hawkish comments from Ben Bernanke on inflation batters Wall Street shares

TimesOnline: US shares dive as Fed chief warns on inflation

The US Federal Reserve chairman said that recent increases in US inflation were unwelcome developments and insisted that the Fed would remain vigilant to ensure the increases were not sustained. The third-biggest one-day fall in share prices this year took the Dow to a three-month low.

Posted by denzil @ 09:39 AM (490 views)
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1. uncle tom said...

Bit odd really - nothing he said came as any great surprise.

More I suspect, the consequence of growing acceptance that the US economy is going off the boil, and that the twin deficits can't be brushed aside for much longer.

One would expect the smart money in the US to be exiting the property market and looking at the more recession proof elements of the US equity markets - only a fool would buy into US treasuries right now - so some cushioning is likely.

Despite the effective confirmation that US interest rates will be rising again, I hold to the prediction I made last Friday, that the MPC will not rock the boat this week, and leave UK rates unchanged.

I would be surprised not to see a split vote however, and my longstanding forecast of August as the most likely date for the next UK rate hike is still holding good.

Tuesday, June 6, 2006 11:18AM Report Comment

2. denzil said...

I would agree with you Tom that August is the most likely date as it coincides with the quarterly inflation report.
I stuck my neck out about 5-6 weeks back and said rates will rise this month. That's probably not likely but you can be sure I will say, "told you so" rather loudly.
My thinking is that the MPC are aware that we are not immune from inflation and a small increase may nip inflation in the bud and will preempt a bigger cut a little further down the line. I just have a feeling that Walton along with King and Barker will consider the argument for a rise quite closely. Not sure about the new bloke but he could sway it.

Tuesday, June 6, 2006 11:28AM Report Comment

3. uncle tom said...

Denzil, When new-boy Blanchflower was interviewed by MP's, he came over as someone who has few original ideas in his head, and can be relied upon to go with the herd. He's the sort of guy who doesn't stick his hand up to vote until he's sure he's with the majority.

At least that's the impression I got - The world is full of surprises...

If the rate does go up this week, I shall defer to your deserved smugness..!

Tuesday, June 6, 2006 11:54AM Report Comment

4. harold said...

A lot depends on the performance of the pound after the Euro zone IR hike. Currency watchers may have noticed the pound's general weakening over the past 2 weeks against the Euro, a trend that is likely to continue if Europe increases by .25, and accelerate if the increase is .5, as some suggest it might be. If it is the latter, then although June is very unlikely to see a rise, July rather than August is my bet.

Tuesday, June 6, 2006 01:06PM Report Comment

5. denzil said...

>>Currency watchers may have noticed the pound's general weakening over the past 2 weeks against the Euro

Against the $ it's started to look a bit shaky too, only a bit though. I'm amazed at how stable the has been but it could start to weaken soon.

Tuesday, June 6, 2006 04:47PM Report Comment

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