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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Tuesday, August 08, 2006

FOMC Meeting

The several cyclical indicators that correlate best with
changes to the Fed Funds Rate all remain strong, although
growth momentum has either rolled over or is peaking. By
my reading, the FOMC should elect to raise the FFR% yet
again.

Should the Fed elect to pause the FFR% at the present level
or perhaps signal a pause is in effect after one final boost
today, they would be operating more on an economic forecast
than on data in the can. Such a move would not be without
precedent, although the Fed usually prefers not to use a
forecast as its decision tool. The forecast that might drive
such a decision would be that the slowing of housing and
consumer spending is sufficient to lead to a slowing of
manufacturing and production growth coupled with an interim
peaking of capacitiy utlization and an eventual sharp
reduction in the growth of business short term credit demand.
These are realistic expectations, but one may have to allow the
FOMC leeway to seek a little more in the way of confirmation.

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