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Tuesday, October 30, 2007

Fed Rate Decision

by Calculated Risk on 10/30/2007 09:56:00 PM

Dr. Tim Duy writes at Economist's View: Fed Watch: And So It Begins

"The Fed begins a two-day meeting today, with market participants widely expecting a rate cut. I am mentally prepared to be on the wrong side of this call, joining the lonely few, but I just can’t tease another rate cut out of the incoming data."
This is another excellent overview from Tim Duy. Recommended reading!

And Tim makes a point I've been thinking about all day:
"... if they do cut, I wish they would stop telling us that their forecast is for moderate growth near potential. A rate cut would suggest that they clearly do no[t] believe that forecast."

In addition to the data that Tim cites, add in this story from the WSJ: P&G, Colgate Plan to Increase Prices
Pressured by high commodity costs, Procter & Gamble Co. and Colgate-Palmolive Co. said they would raise prices on consumer staples .... P&G's price increases will be particularly extensive, between 3% and 12% on goods including diapers, fabric softener and pet food.
That suggests P&G and Colgate have significant pricing power. A rate cut with rising prices and a moderate growth forecast? Who's the Fed Chief? Arthur Burns?