Rory Robertson
Rory Robertson
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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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The lesson from Australia is, as long as interest rates stay relatively low, the market will cool, not crash.
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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.
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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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It leaves open the door for the Reserve Bank to raise official interest rates sooner rather than later.
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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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This number doesn't tell us much at all -- the seasonal factors are all over the shop. It only means something if it's maintained over the next several weeks.
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After a long period of inactivity, the tide looks to be turning on the local interest-rate front.
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The thing driving service prices is wage growth, and after two years of sub-par economic growth, we've got wages decelerating. If the Fed doesn't get the economy growing at an above-trend pace in the next couple of years, deflation will arise.
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The thing that helped the economy so much was a drop in interest rates, which meant lower mortgage rates, which meant consumers have been able to tap the wealth in their homes by refinancing and taking equity out of their homes. With rates having backed up so sharply, refinancing is not such a bargain any more.
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The sharp rise in mortgage rates that is now under way threatens to limit the refinancing boom, limiting the cash that will be dropped into U.S. consumers' hands during the critical holiday-shopping season.
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If we hadn't had a recession a year ago, and we were watching the fall in employment, a stalling manufacturing sector, falling bond yields and falling stock prices, many people would think we were entering a recession. There's an assumption that the recovery will continue and get stronger next year, when in fact it's possible the economy's tipping over again.
skeptical time
I am skeptical that this time will be different.