Rory Robertson
Rory Robertson
local looks period tide turning
After a long period of inactivity, the tide looks to be turning on the local interest-rate front.
economy happened mention past rates seven
I think the back-up in rates should rate a mention -- it's the most significant thing that's happened to the economy in the past seven weeks.
downside market risk yield
Just as the market overshot on the downside in yield in May/June, the risk is that it now overshoots on the upside.
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I think it's going to be 50 basis points because the Fed is worried about the economy, and I think the accompanying statement will reflect that.
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Rising oil prices are quite unhelpful, and falling prices are quite helpful in terms of giving stimulus to the economy. Lower prices feed through pretty well to everyone immediately.
economy playing scenario simply
At this stage, the worst-case scenario for the US economy post-Katrina simply is not playing out.
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The Fed is trying to do what it can, but the history of the past 200 years is that big booms tend to end badly -- big equity market booms in particular. The Fed so far has done a magnificent job of holding the show together, but we don't know what effects of the bubble are still in the pipeline.
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The Fed ultimately will be forced to cut rates further because we have had this ongoing issue of sub-par growth, disappointment on the jobs front and core inflation edging lower. People are talking about a terrific snap-back in the economy after the war, but I'm skeptical we're likely to see it.
bond breeding domestic fact gross inflation low market modest people pressure prints product quite steady weight
If gross domestic product prints 2.75 or 3 percent, it's broadly where the market is. People put very little weight on the fact that any pressure on inflation in the U.S. is quite modest and that's breeding low and steady bond yields.
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I'm not sure how markets might react. On one hand, you could see the shorts kicking in, pushing it higher, but on the other hand, you could see investors feeling a bit nervous because the Fed is saying things are worse than they thought.
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The inflation risk is less intense than many would imagine and, as energy prices edge lower, some investors are seeing value at current yields. It helps reduce the pressure the Fed has been worried about.
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All the good growth is in the forecasts, in the idea that financial conditions have eased. But we've seen that doesn't always turn into actual good growth.
explicit fed markets pause
The markets were a little disappointed that the Fed didn't give any explicit hint that a pause is around the corner.
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The markets are coming to understand that policymakers will be inclined to keep rates very low for an extended period -- the FOMC (Fed rate-setting committee) can still only dream that the economy will be strong enough in 2002 to justify a rate hike.