Gary Thayer
Gary Thayer
fed income negative raising rates speeds time
It speeds up the time that the Fed will probably think about raising rates and that's negative for fixed-income.
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It suggests the Fed is going to be watching closely to see if it is time to start taking back rate cuts. I don't think he is saying that is imminent, but his tone is that it might be sooner rather than later.
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Looking back, it is understandable why the Australian and New Zealand currencies peaked in early 2005. That was about the same time that the demand for crude oil also started to moderate.
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He's mentioning that the dollar should stay firm and that's been a good factor for our economy. He's been concerned for some time about foreign investors wanting to keep their money here and if we keep our policies in line that should hold for a while.
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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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It's still a good reading overall, but not quite as robust as we've seen in the last several months. The encouraging thing is that the employment component increased again. We are beginning to see businesses becoming a little more willing to hire.
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It's sort of a good news-bad news situation though, because if it gets out of hand, it can create other problems for the economy.
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The big number is the employment number on Friday. If that number comes in weak for the third consecutive month, views on the Fed are likely to change significantly.
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The bond market liked the inflation data. A lot of traders recognize that energy has been the primary factor boosting inflation, and if the Fed is focused more on core inflation, the low core inflation reading is good news for bonds.
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The bond market had been thinking that the weak economic numbers that we've seen would cause the Fed to think twice about raising rates,
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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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These numbers look as if there's no urgent need to raise interest rates much further.
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These numbers are slightly dated, but they show that the inventory liquidation period is over, and that (the) drag on the economy is probably behind us.
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It's not a big drop. It's reflecting the fact that the economy has improved this year, but not enough that consumers are convinced things are sufficiently better.