Fed guess by Capmarketline

All the data suggests a coming monetary easing. But I have a strange feeling. I am not that convinced the Fed will be inclined to ease so soon - maybe because everyone, especially the stock market, is appreciating this so much. The relief would be too furious and the job of crunching down inflation not done.



And in Capmarketline I have found some interesting thoughts, which go in my direction:

My guess is the Fed sees the run offs of excess housing and goods inventories as the prelude to eventual recovery of production and later, housing investment. So, the Fed is forecasting that rising final demand for consumer goods, services and exports will lead to this upcoming recovery of production and housing. Implicit of course, is the notion that weaker production and housing will not produce increases in joblessness and weakened confidence that could bring the economy down. The Fed may also not mind if the economy stagnates for a few months, if it makes it easier to squelch

inflation pressure further and create enough slack to goose the economy later this year for a clean run through 2008.