nnuut
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This is disturbing!
Beware: More Fed hikes may be coming
Inflation is still worrisome enough that more rate increases, not cuts, could follow the Fed's 'pause.'
By Chris Isidore, CNNMoney.com senior writer
October 20 2006: 6:22 AM EDT
NEW YORK (CNNMoney.com) -- Inflation barely seems to be on the mind of investors any more.
Rates in the inflation-sensitive Treasury bond market indicate investors believe prices and wages are all but under control. The Dow industrials have been hitting record highs - and closed above 12,000 for the first time on Thursday - partly on the belief that inflation is tame enough to allow the Federal Reserve to start cutting interest rates soon after more than two years of rate hikes.
Those expectations didn't change this week, even as government readings on inflation at the retail and wholesale level both showed an important inflation gauge excluding volatile food and energy costs to be well above the 1 to 2 percent range widely assumed to be the Fed's comfort zone.
The markets weren't overly rattled by the reports. Stocks rallied Wednesday and bond yields fell further after the Consumer Price Index report, a sign investors believe rates are heading lower, not higher.
But some Fed watchers think the central bank's policy-makers are more concerned about inflationary pressures than are most investors on Wall Street.
And they think the Fed policy-makers will start sending signals to the markets soon that when it's done with its current "pause" the Fed's next move could be to start raising rates, not cutting them, as many on Wall Street have been hoping. (continued)
http://money.cnn.com/2006/10/19/news/economy/inflation/index.htm?cnn=yes
Beware: More Fed hikes may be coming
Inflation is still worrisome enough that more rate increases, not cuts, could follow the Fed's 'pause.'
By Chris Isidore, CNNMoney.com senior writer
October 20 2006: 6:22 AM EDT
NEW YORK (CNNMoney.com) -- Inflation barely seems to be on the mind of investors any more.
Rates in the inflation-sensitive Treasury bond market indicate investors believe prices and wages are all but under control. The Dow industrials have been hitting record highs - and closed above 12,000 for the first time on Thursday - partly on the belief that inflation is tame enough to allow the Federal Reserve to start cutting interest rates soon after more than two years of rate hikes.
Those expectations didn't change this week, even as government readings on inflation at the retail and wholesale level both showed an important inflation gauge excluding volatile food and energy costs to be well above the 1 to 2 percent range widely assumed to be the Fed's comfort zone.
The markets weren't overly rattled by the reports. Stocks rallied Wednesday and bond yields fell further after the Consumer Price Index report, a sign investors believe rates are heading lower, not higher.
But some Fed watchers think the central bank's policy-makers are more concerned about inflationary pressures than are most investors on Wall Street.
And they think the Fed policy-makers will start sending signals to the markets soon that when it's done with its current "pause" the Fed's next move could be to start raising rates, not cutting them, as many on Wall Street have been hoping. (continued)
http://money.cnn.com/2006/10/19/news/economy/inflation/index.htm?cnn=yes
