Alan Ruskin
Alan Ruskin
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We're trying to feel out where's the peak in the Fed funds rate. The data has tended to work in the direction of a weaker dollar.
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My concern is that what's happened here is that inflation is higher than the Fed anticipated. On top of that, the kind of tightening already imposed by the markets, in terms of lower equities and higher bond yields, is setting up weaker growth in 2005.
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My gut says the Fed doesn't have too many bullets left to fire, and therefore they have to use them sparingly, and we'll see a (quarter percentage point) cut at the next meeting.
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While the data is clearly dollar positive, I would expect that the market will quickly shift back to the attention it is giving to Fed policy.
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The data will keep the Fed on edge and provides fodder for the Fed hawks.
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The data will certainly encourage views of a truncated Fed tightening cycle.
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The data should tend to encourage views that the Fed is correct and that inflation looks to be contained.
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There was always going to be some shock value when the Fed changed 'the considerable period' statement, but we had always felt that the change would come when it was fairly obvious that it should, and when the Fed had softened the blow, by alerting the market to such a change, ... As it was, there was no such warning, and the sharp market reaction is testimony to just how far it caught asset markets 'off-side.'
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The Fed Chairman would be very happy if the bond market did some of the tightening for him,
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As outgoing Fed chairman, he's clearly concerned about the asset cycle and the prospect the low concern on credit risk is going to be associated with a decline in asset prices down the track,
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To some extent, the bond market's trading pattern has not been resolved of late. This might provide some resolution, and I think it is going to be resolved in terms of higher yields,
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Up until recently, oil price hikes have offset disinflation. This time around, we're in a situation where inflation is starting to peek its head above the parapet, and policy makers will see it more as an inflation threat. That's problematic -- if they have to start reacting to higher inflation pressures by raising rates, that does slow the economy down.
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Non-farm payroll numbers of over 300,000 are pretty much consistent with economic growth of about 4 percent, (and) that's way above trend,
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Poor employment trends clearly are weighing on sentiment, ... The (IBD) data is consistent with a meaningful decline in the Michigan survey.