Five Reasons Why the Fed Won’t Cut Rates

Wednesday, August 22, 2007 | 03:37 PM

The Fed assumption made by many is that its a sure thing that Bernanke and the FOMC are going to give into the whining and pleading and crying and begging and beseeching and howling and weeping (In Yiddish, its called "kvetching") from the anti-free market cry-baby commies currently residing in positions of influence on Wall Street and the media.

Therefore, goes this line of thinking, we should expect rates cuts in September and beyond.

Not so fast, says the WSJ's Marketbeat. They assembled a short list of 5 reasons as to why a rate cut won't happen -- least not at the September meeting:

Why the Fed Won’t Cut Rates

1. Official on-the-record Fed commentary: St. Louis Fed head William Poole and Richmond Fed head Jeffrey Lacker have loudly argued against it. with Poole saying a “calamity” is required first, and Lacker noting the impact on consumers is “relatively small."

2. Off-the-record whisperings: Fed reporter Greg Ip wrote: while “officials acknowledge conditions are far from calm,” they cited stable stock prices, “a pickup in issuance of jumbo mortgages and other factors as evidence that in recent days conditions have improved, though gradually, instead of worsened.”

That doesn’t sound like a monetary policy committee that’s ready to lower rates.

3. What’s Been Done So Far: Through open market operations, the Fed has maintained a lower funds rate than the 5.25% target for the last couple of weeks. In addition, the Fed reduced the fee on lending from the System Open Market Account

4. Key economic indicators: Official household unemployment rate in July was 4.6%, which was up from the yearly low of 4.5%. Generally, it takes at least a change of 0.2 percentage points in this rate for the Fed to act, notes Ashraf Laidi, head of forex strategy at CMC Markets. Meanwhile, the year-over-year rate of consumer inflation still remains above the Fed’s upper target of 2%.

5. Moral hazard: Comments by Messrs. Poole and Lacker and the Fed suggest they are reluctant to be seen as bailing out hedge funds and other Wall Street players who became too intimate with leverage.

Go read the entire thing.
(Coming later this week: 5 reasons why they will cut rates).


Five Reasons: Why the Fed Won’t Cut Rates
David Gaffen
Marketbeat, August 22, 2007, 12:02 pm

Wednesday, August 22, 2007 | 03:37 PM | Permalink | Comments (53) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



TrackBack URL for this entry:

Listed below are links to weblogs that reference Five Reasons Why the Fed Won’t Cut Rates:

» From MRAP Delay to Alan Watts from et alli.
'What the clever people in this administration seem to miss is that there is no one in Iraq who will do any better at stabilizing the country than Maliki.' Patrick Lang Out and About on the Net ~~~~~~~~~~~~~~~~~~ Five Reasons [Read More]

Tracked on Aug 22, 2007 7:10:59 PM


Any one of these headlines would send a "normal" market running for the exits:

When you can hand over the title of someone else's boat as collateral to the fed. for cash...none of those reasons for or against matters one damn bit.


Posted by: michael schumacher | Aug 22, 2007 3:52:03 PM

The comments to this entry are closed.

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™