Wikinvest Wire

Ahead of schedule, but otherwise not too different

Tuesday, April 29, 2008

Compared to the last Federal Reserve easing cycle from 2001 to 2003, we're a little early for a pause, but it looks like that's what we're going to get this summer.
How long the pause lasts remains to be seen - last time it was almost a year before short-term rates were cut from 1.75 percent to 1.25 percent. Shortly thereafter, it was on to 1.25 percent and then an even one percent where they sat for more than a year.

Of course in the current cycle, we started from a lower level and went a little bit faster than last time. And food and energy prices are now sky high - you've don't hear too much concern about "deflation" this time around.

[Note: In the chart above, a quarter-point rate cut at tomorrow's FOMC meeting is assumed. You know what happens when you assume...]

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ScaredInCA said...

Going by 2-yr treasury yield, I expect there to be no rate cut tomorrow. When crude oil prices are rising steeply and stock markets having been recovered, Fed will lose entire credibility if they cut rates now. They will be shot dead if they pronounce the word 'deflation' now. They will have to wait till some big bank files for bankruptcy to use the word again.

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