monetary matters
What's that up ahead, shrouded in the mists of fog and dark of night? Arrrrgghhhh!!!!
I'm torn on whether the Fed will drop interest rates a quarter percent or hold steady at the next meeting. However, I'm almost certain if they don't drop the rates the market will react badly and a self-fulfilling prophecy of economic decline will unfold. While the Fed would certainly prefer to hold steady, I think doing so is a mistake.
I can submit one bit of statistical evidence that the Fed probably shouldn't be waiting any longer before making a cut:
"Ned Davis Research recently studied Fed rate moves going back to 1920 and found that, typically, it has taken only 5 1/2 months between the last in a series of Fed rate hikes to the first in a series of rate cuts."
Now, typically doesn't mean always, and I don't know the "short" and "long" deviations from this norm. But the Fed stopped raising rates in June '06 after two years of continuous gradual increases, which will put us roughly 15 months into the "typical" 5.5 months IF the Fed begins lowering rates in September.
So we are, speaking in terms of averages, long overdue. And waiting too long is bad since trying to change the course of the entire American economy to avoid a pitfall (of whatever sort) is slower than trying to steer the Titanic around a 'berg.
I'm torn on whether the Fed will drop interest rates a quarter percent or hold steady at the next meeting. However, I'm almost certain if they don't drop the rates the market will react badly and a self-fulfilling prophecy of economic decline will unfold. While the Fed would certainly prefer to hold steady, I think doing so is a mistake.
I can submit one bit of statistical evidence that the Fed probably shouldn't be waiting any longer before making a cut:
"Ned Davis Research recently studied Fed rate moves going back to 1920 and found that, typically, it has taken only 5 1/2 months between the last in a series of Fed rate hikes to the first in a series of rate cuts."
Now, typically doesn't mean always, and I don't know the "short" and "long" deviations from this norm. But the Fed stopped raising rates in June '06 after two years of continuous gradual increases, which will put us roughly 15 months into the "typical" 5.5 months IF the Fed begins lowering rates in September.
So we are, speaking in terms of averages, long overdue. And waiting too long is bad since trying to change the course of the entire American economy to avoid a pitfall (of whatever sort) is slower than trying to steer the Titanic around a 'berg.