On Aug 7, 2007, at 3:07 PM, Michael Pollak wrote:
> Very funny, that last line :o) But in all seriousness, hasn't it been
> front page news over the last week that the futures markets have been
> pricing in a near certainty of a rate cut before the end of the
> year, and
> the high probability of two (quarter-point) cuts? So what is more
> hawkish
> than you expect must be hugely more hawkish than they, the all-knowing
> markets, expected, no?
I think the Fed takes a more class struggle long view of things than do the markets. The Fed looks at a 4.6% unemployment rate and thinks "[dangerously] high rate of resource utilization." The markets see some hedge funds blowing up, sound off like Cramer (finally got around to watching that - what a lunatic), and expect the Fed to come to their rescue. The Fed won't ease on a financial panic unless it looks like it's system-threatening. Barring that, they won't ease until the unemployment rate approaches 5%.
Doug