Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Correction Review - 26th Jan 20
The Wuhan Wipeout – Could It Happen? - 26th Jan 20
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Dallas Fed President Fisher Could Dissent if Crude Oil Prices Maintain Upward Trend

Interest-Rates / US Interest Rates Mar 09, 2011 - 04:12 AM GMT

By: Asha_Bangalore

Interest-Rates

Best Financial Markets Analysis ArticleDallas Fed President Fisher indicated yesterday that he would vote to scale back or discontinue the Fed's Treasury securities buying program of $600 billion at the March 15 FOMC meeting.  Last week, Chairman Bernanke has indicated that only under conditions of strong sustained growth, expanding payrolls, and inflation readings that are consistent with price stability would the Fed consider terminating the program.  Current economic data indicate that the Fed is not even close to meeting these targets. 


The Fed has completed roughly 67% of the purchase plan announced in November 2010.  In January 2011, President Fisher voted with the majority to continue expanding its holdings of Treasury securities.  In his opinion, the Fed's job "is done" and continued purchases of Treasuries may result in raising inflation expectations.  As shown in Chart 1, inflation expectations have moved up as the crisis in North Africa has intensified and lifted oil prices in recent weeks. 


 
Stepping back in time, there was a sharp increase in oil prices in a very short time span in the first-half of 2008 (see Chart 2).  We are all aware of the major economic events of 2008 and a reminder is unnecessary.  President Fisher dissented at each meeting during January 30, 2008 - August 2008 to either take no action or adopt less aggressive easing of the federal funds rate between January 2008 and April 2008.  The Fed went on to lower the federal funds rate 150 basis points between January 30, 2008 and April 2008 to 2.00%.  At the June and August 2008 meetings, President Fisher would have preferred to raise the federal funds rate when the Fed held the funds rate unchanged.  He voted with the majority at the September 2008 meeting to leave the federal funds rate steady at 2.00% by which time oil prices had reversed trend (see Chart 2) compared with the earlier part of the year. 

Returning back to the present and comparing notes, the voting preferences of President Fisher appear to be closely tied with the trend of oil prices.  The U.S. economy has recorded six quarters of economic growth but is yet to post meaningful gains in payroll employment.  The level of payroll employment in February 2011 (130.515 million) is a tad above the level recorded in June 2009 (130.493 million) when the economic recovery commenced and real GDP is about 5.0% below potential GDP.  The slack in the economy, at the present time, is significant to justify maintaining the current stance of monetary policy. 


Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules