We have now baby stepped up to a FF rate of 4.0%. Fed/FOMC
liqudity measures -- Fed Credit and the adjusted monetary base
remain constrained, although the money base did pop up for a
week or two past Katrina.
M-3 growth has accelerated sharply this year as bankers switch
funding from regular reserve deposits to the larger no or low
reserve deposits. The banks have the window open to lend and
loan growth continues brisk. Ironically, the system liquidity
embodied in M-3 has no doubt helped the energy pit traders and
hedgies keep rolling.
Uncle Al continues to push up rates gently, hoping to coax a break
in the energy driven commodities market. Tricky business. Just so
you know, recent experience (1995-2000) shows that the CRB commodities
index did not buckle until after market short rates exceeded 5.0%.
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