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Tuesday, June 10, 2008

Bernanke Speaks on Rate Cuts and The Economy


The market is set to gap down this morning. Comments made by Fed Chairman Ben Bernanke are the primary blame for the downside pressure. During a speech last night, Bernanke noted that the Fed has no intention of cutting rates in the near future. In fact, he gave an indication that a rate hike may be in store in the near future.

Considering the the negative psychological condition of many market participants with regard to the US economy, it is no surprise that the market is reacting in a bearish manner. The fixation on high gas, food, and utility prices gives the impression that the US economy is in the "danger zone." The Fed seems to think otherwise, noting previous rate cuts, record exports, and fiscal stimulus as catalysts for a strengthening economy Bernanke stated "... the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so." Let's hope he is right...

What are your thoughts on the state of the US economy? Is the Fed making the right move, or are they adding salt to the wound?

Regards,

Nick Fenton
Sr. Trade Analyst


Post Comment To Article    - Comments (4) -    Print Article   

Anonymous Andy Swan says...
Right move. Economy is in amazing shape if you net out energy costs (which I understand you can't do), which are adding inflationary pressures and do not allow for more money supply in the system.

Energy costs will pullback soon, and everyone will see that the economy is actually in slow-growth, not a recession as so many predicted.

A triumph considering oil and food prices....but much risk remains on the horizon 10:02 AM 

Blogger OptionsNews says...
I think they are painted in a corner. Damned if they do damned if they don't 10:23 AM 

Blogger Nick Fenton says...
Andy, I agree that we are in better shape than most suspect. Gas, food, and utility prices will certainly impact domestic consumer spending, but a pick up in overseas buying activity in the US (as a result of the weak dollar) will help balance that out. I'm "cautiously optimistic." :)

optionsnews - I hear ya! The Fed will never get a break in this type of environment. All part of the job though. 10:33 AM 

Blogger Matt says...
Based on the low value of the dollar, increasing the rate a point or a point and 1/2 could help strengthen the dollar and decrease the cost of some goods, as long as the capital markets continue to show improvements.

The consumer side of the market is the only weak side and housing will bounce back hopefully in a more stable manner by 2009. 6:36 PM 

 

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