Gary Thayer
Gary Thayer
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The Philadelphia Fed business outlook index is still above zero in January, pointing to expansion, but the expansion is not quite as broad.
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This report leaves the door open for a rate cut. There's still uncertainty out there, and as a way to sort of offset the uncertainty, the Fed will do more than it may need to do.
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We think the economy is poised to slow down and that's good news for the Federal Reserve.
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If we hadn't heard from Greenspan last week that the Fed is still worried about an uneven recovery, we might be more upset about these numbers. But Greenspan is concerned that these retail sales numbers could falter later on so these numbers probably won't have that great an impact.
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We got good news on inflation. People anticipate that with inflation still very low, the Fed will stay on hold for awhile.
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Generally I think these numbers could reduce some of the concerns about a quick or dramatic change in Fed policy.
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Inflation is creeping up, but it's not out of hand. I think that's pretty important. The bond market may have discounted a worst-case scenario over the last couple of months on inflation, and now maybe traders won't have to worry about the Fed moving too fast.
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These numbers show the economy is indeed in recession, and they leave the door open for the Fed to cut rates again.
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So core inflation is still rising slightly but doesn't appear to be a problem, and I think this is good news for the Federal Reserve . With energy prices declining it reduces the risk that fuel costs will be passed on to consumers.
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The Fed will probably not put a lot of emphasis on this data and instead will be looking more at the economy after the hurricane.
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The Fed will probably hold rates steady at a low level as long as they can. And I think as long as the unemployment rate is rising, they'll maintain a policy bias toward weakness.
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The Fed will overlook the strength in the economy before Katrina and focus more on getting the economy back on its feet and probably will hold policy steady until we see how the economy is actually dealing with the shock of lost jobs and high gasoline prices resulting from Katrina.
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The Fed may be looking at oil prices as a reason for the economy to falter and not a reason for it to overheat, so they won't want to raise rates yet,
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If you look back at the'70s and'80s, the Fed was perceived to be the man behind the curtains. Today, it's looked at as a more prominent player. I'd say (Greenspan's) better known than members of the Supreme Court, and that wasn't true of his predecessors.