Mark Vitner
Mark Vitner
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There is no operating manual that says what a neutral fed funds rate is, but the Fed knows that it's higher than 3 percent,
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We expect a big jump in consumer confidence now that the effects of Katrina and higher gas prices are further behind us. Higher confidence will lead to a better-than-expected holiday shopping season as well.
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The Fed has to conduct a bit of a high wire act. If rates were to rise quickly that would put part of the economic expansion at risk, particularly residential construction and commercial development.
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it's somewhat surprising how resilient the economy has been, despite higher energy prices.
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There was a huge sign of relief when the number came in above 100, and that's why the market rallied, ... There was a thought that the combination of rising interest rates and higher gas prices would knock it below 100.
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A very high proportion of that job growth is occurring in high-paying professions. This is a demand-driven market and demand vastly exceeds supply.
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While it seems counterintuitive, higher gasoline prices are actually helping restrain core inflation, ... With more money being spent for gasoline, consumers have fewer dollars left for discretionary purchases. The net result is that firms are slashing prices on everything from cars to beer in order to move product.
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It (consumer sentiment) was a little higher than expected, but the stock market has come back, gasoline prices have come down, and the weather has been beautiful and that has to affect consumers somewhat.
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High gasoline prices gradually eat away at income. The effect isn't felt all at once. We have seen consumers change their behavior in recent months and there should be further changes if prices stay at these levels.
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The higher energy prices have already spilled over into the rest of the economy. But it probably will not cause major problems for the economy.
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The impact of stronger job growth more than overcomes the impact of higher mortgage rates. It doesn't mean we'll have a month like March every month. But home sales should remain strong even with mortgage rates about a percentage point above the low point.
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We're going to have plenty of weak economic reports over the coming months. If they respond to every one, they'll get down to zero percent interest rates pretty damn quick.
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We're just now realizing how badly off the economy was in the second quarter, ... The wider trade gap, along with the weakness we saw in the business inventory numbers that came out this week and weaker construction spending, will probably result in a second-quarter revised GDP number that will be zero or even slightly negative. It will be an eye-opening number, but it's no more worrisome than what we've seen.
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We're seeing both the quantity and quality of the jobs being created improving.