As a brief aside from my Forecasting series which I will be wrapping up in the next few days, I wanted to remind everybody to keep an eye on the Fed and the markets today. What will Uncle Ben and the board decide to do? I suspect that they will lower rates another quarter percentage point, and we can expect a further drop in the US dollar today. That will help cushion the financial firms from further subprime housing fallout, the 800 pound gorilla in the room.
The markets may pop up a little, but I think everyone knows that inflation is the other 800 pound gorilla in the room. Heck, the whole US Economy is turning into "Gorillas In The Mist" here. The outlook is hazy, no matter what happens. If inflation gets any further out of hand, we can expect a mild-to-severe recession as the US consumer tightens their belt. We can expect heightened volatility today in the markets, because traders will be reacting to the likely changes to the fed funds rate. For what it's worth, my opinion is that the Fed does nothing and they should leave the rates where they are. That might offer a little stability and reduced volatility in the markets, while not re-inflating the housing bubble.
Anyway, I will probably post my next entry in the Forecasting series later today. See you then, and thanks for reading.
---Sincerely, Trevor Stasik.
Fed Funds Rate, Recession, Ben Bernanke, 800 pound gorilla