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Interest Rate Comments
Posted on June 16, 2008
Of late, Fedspeak has been hawkish on inflation and has spokenfondly of the US Dollar. Itchy trigger fingers? Well, inflation hasexceeded the Fed's expectations, and the economy has not yetdeveloped the deeper weakness the Fed has feared.For example, take the ISM survey of manufacturing. This broaddiffusion index made an expansion cycle low of 48.3 for 3/o8. Areading below 50 on this index signifies contraction, but itusually needs to fall below 43.5 and stay down for awhile beforerecession is confirmed. Importantly, it is rare for the Fed toelect to raise short rates before a recovering ISM i...
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