The WSJ does their usual thorough job in parsing the Fed’s Statement:
click for full story
Source:
Inflated Inflation Worries
March 21, 2007
http://online.wsj.com/public/resources/documents/info-fedparse0703.html
Parsing the Fed
March 21, 2007 11:30pm by Barry Ritholtz
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The Fed’s position seems to be that the only thing that really matters is that consumers keep consuming, and this means keeping interest rates low even if that happens to allow inflation to spiral.
Fortunately, Big Ben doesn’t have to rely on the Antoinette-ish “Let them eat cake,” as food is too volatile to count in inflation.
And on that teeny tiny change in wording, the indexes spike to the upside?
I would rather evaluate the reaction rather than the words of the feds.
well, the writing is on the wall. look for some fed rate cuts later this year. there can be no other conclusion with the re-wording of the statement. And jusdging by yesterday’s market reaction, its a done deal. lower rates….support to housing slowdown…everythin will be fine, apparently. never under estimate the power of the fed, its got all the money!
but what i dont get about yesterday is why the euro, the yen, the 10 year and 30 year, and the stock indexes all rose significantly after the announcement. Who is right and who is wrong? Can everyone be right at the same time?
oh and by the way, just so you know, M3 is just absolutley balooning
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BR: Its a flight from the dollar . . .
Selling dollars since the fed has officially put the blinders on by making the dollar worth less by signalling that it’s going lower rates. Not that any of the language says that they are……however they have removed the bias that they placed on raising them anytime soon. Add in some free (well almost free-might as well be for the brokers) money and you have a recipe for blast-off. If you had a chart of SPY open before the announcement you could plainly see the entrances were already crowded before the actual news came out.
MS
oh..sorry I did’nt see Barry’s comment at the bottom…
I wonder what Lacker thinks.