As my readers know exactly where I stand on the Fed both in the critique of what they have done and where they may continue to go, I’ll give my analysis of today simplistically. Does anyone outside of the Fed think that any new policy news today, in the context of already historically low interest rates, will alter the behavior of any lender, corporate CEO, small business or large, or any individual consumer. Will the decision to build that plant, make that loan or buy that car or home be triggered by any new news by the Fed today? I think not. And by the way, the Fed will want you to close your eyes when tomorrow’s m/o/m CPI rises by an expected .6%, the largest gain since June ’09 (gasoline prices today are at the highest level since April, up .04 just in the past 3 days and only .13 from $4.00). Central bankers overnight in New Zealand, South Korea, Indonesia and the Philippines all kept their benchmark interest rates unchanged. An interesting central bank comment came this morning from ECB member Demetriades who said verbal intervention may be enough, “A Central bank has this wonderful ability that no other player in the market has when it says ‘I’m going to do whatever it takes,’ and everyone believes that…In the end, they may do nothing.” We’ll see.
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