Category Archives: Federal Reserve

Rational pattern

Historically the fed has wanted to avoid haphazard moves. For example, there is surely a zero chance they will do anything at the next meeting because they would appear to have made a mistake at the previous one.

If you look back at rate changes, they usually are in some rational pattern. They pick a direction and go that way until they feel they accomplished their goal, then they go into a wait mode looking for signs. That’s where I think we are now and that will probably last through the election because they don’t want to have any impact on the voters.

I also feel that the housing marketing is going to really take a hit, I just read the first article that used the word “collapse” so it’s starting to get some press, and that will really dampen the economy moving forward and so in my scenario, the fed’s next move will be loosening, probably spring-summer 2007.

Greenspan considered EVERYTHING when making decisions

I am far less familiar with Bernanke, but I can tell you that Greenspan considered EVERYTHING when making decisions. His modus operandi was to take a bath each morning and read volumes of detailed reports on everything including material that seems so obscure you had to wonder what he was thinking. I assure you, the fed, regardless of Bernankes bathing habits, isn’t relying on only a few factors.

The Fed rocks

The Fed can rock the markets. They know this and act accordingly. Which includes rocking them when needed. They rarely act between meetings and without notice but when they want the markets to get the message, they move in-between meetings. They did this when the markets were dropping after the dot com bubble. They wanted the markets to recognize that they were lowering interest rates and were not unaware of the situation so they cut between meetings and the market jumped but only short term. It still continued to descend over the next months but slower and much more controlled.