Possible FOMC Action

BBC News ^

[Sean Flynn]

As the US Federal Reserve prepares for its latest decision on interest rates, most analysts predict it will announce a further rise on Thursday. With its rate-setting Open Market Committee sitting down for two days of talks, the Fed is expected to increase rates by another 0.25% to 5.25%.

This would be the 17th rise in a row, putting rates at a new five-year high.

Commentators point to the fact that Fed chairman Ben Bernanke has already warned that inflation is a concern.

He said at the start of this month that recent increases in inflation - triggered by rising fuel prices - were an unwelcome development.

[Sean Flynn]

Just curious, is there anyone who doesn't think the Fed will raise rates?

[rocksblues]

Raise the rates, people have less money to spend, businesses raise prices, raise the rates. /S

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[stylin19a]

i'm guessing .5

[BikerGold]

"Just curious, is there anyone who doesn't think the Fed will raise rates?"

Faster horses; younger women; older whiskey; MORE money...

[Rodm]

Dear Fed,

You can't stop energy (oil-based) inflation which affects every other category of goods and services. Jim Carter's Fed Chief made the some dumb mistake. Raising the rates can't stop this kind of inflation. That's why Carter had double digit inflation, double digit interest rate and high unemployment.

If the Fed doesn't wake up we will end up in the same situtation

[Moonman62]

Yep, the FOMC is battling the economy, not inflation.

[Trust but Verify]

Seems the Fed is determined to overreach again, as they did in the late 90's. Some lessons are never learned.

[Brellium]

The fed will raise rates based on the PPI numbers, not the CPI numbers. CPI came in at 0.3% increase last month with a 0.2% increase in the core rate (excluding energy and food). The PPI numbers came in at 0.2% but the core rate (excluding energy and food) was 0.3% the impression that gives the Fed is businesses are tacking on increases in prices and hiding it as energy related.

[Moonman62]

You can't stop energy (oil-based) inflation which affects every other category of goods and services. Jim Carter's Fed Chief made the some dumb mistake. Raising the rates can't stop this kind of inflation.

Essentially, you're right, but oil price increases mostly aren't from inflation. They come from the market and from market manipulation (OPEC). If the Fed wrecks the economy enough to bring down oil prices, then it is doing much more harm than good, and is doing nothing about inflation, which comes from the government, not the private economy.

[Element187]

Pretty doubtful... i'd be shocked if he did.


I'm kinda sitting in cash for now, ready to jump into the game if the market does another major sell off because of rate hikes this week and next month.

[Element187]

whoops ... he will raise rates.. its doubtful if he will lower rates.

[Element187]

Yep, the FOMC is battling the economy, not inflation.

why would the fed purposely destroy the economy??... Metals went ballastic for too long, the fed is trying to crush the speculation of a metals bull.

[Moonman62]

Yep, Bernanke has already said that the yield curve is useless this time around, even though it is the best indicator of Fed overreaching, and predictor of recessions.

[Rodm]

Energy costs are so interwoven in goods and services costs, I don't believe the FED can get an accurate picture. The 16 rate hikes have not slowed inflation. The FED can raise rates until we stall and crash.

[Rodm]

I don't think the FED wants to destroy the economy. They just can't see the forest, for the trees.

[Moonman62]

why would the fed purposely destroy the economy??... Metals went ballastic for too long, the fed is trying to crush the speculation of a metals bull.?

Because the speculators can't be destroyed without wrecking the economy. This has been going on since 1929. How many times does this drama have to play out?

Let the speculation play out on its own. Better yet, run a steady monetary policy using market indicators, rather than needlessly putting our economy on a roller coaster ride.

The Fed by law is supposed to be battling inflation, not the economy, nor speculation.

[Moonman62]

Rate hikes become neutral with respect to inflation once they pass a certain point. While they do slow they creation of money (deflationary), they also slow the economy (inflationary). Most of the time when the Fed causes a recession, market adjustments such as layoffs can bring down prices, thus making it look like inflation is tamed when it really isn't.

Sometimes this smoke and mirrors game doesn't work out and a name has to be invented like stagflation.

[Rodm]

I would say competition in the market place, including the international markets, have really kept prices in-check.

The competition is so keen in my business that it keeps the lid on rising prices. I can easily do business on both US coasts, Taiwan, etc. I can find the best products at the best price using the Internet.

My suppliers just can't tack on 5% of 10% extra every other month because there are a lot of other supplier that want my business.

The cost that has increased is transport goods. There is no shopping around for oil, gas. Demand is increased, Supply is limited and we have a oil cartel oligopoly

[stylin19a]

bad guess
now i'm guessing that they wont stop.