By now you have probably heard about the speech given by Charles Plosser. Read it. It is destined to be a classic as it is an extremely candid recounting of the events of the last few weeks from an "inside the Fed" perspective. The speech itself clearly shows that Plosser is reluctant to cut rates on the 18th. In an interview afterwards, he makes it crystal clear. (Bloomberg)
"We want to be careful not to overweight one piece of information,'' he said in an interview late yesterday after a speech in Waikoloa, Hawaii. "I've not made up my mind at all'' on whether a rate cut is needed, he said.
Tim Duy doubts that the expected cut on the 18th will be the only one. Unfortunately, they might be in a lose-lose situation. If they cut only 25b.p., people will expect more. If they cut 50b.p., people will infer that it's worse out there than they thought... and thus they will expect more. Knzn has more to say about why he wants 50b.p. I'm still expecting just 25b.p. and even that is causing me a lot of internal struggle. I'm basically in the camp with Plosser and Poole, and if you read the last line of Tim Duy's post, you'll know why.
I was listening to Bob Brinker's Money Talk on the radio this weekend. He says that the Fed is being dragged into this "kicking and screaming." Brinker says the Fed is behind the curve... a statement that neither Duy nor I would agree with. But he's right about the kicking and screaming part.
Finally, I found a brand new blog while ego-surfing this weekend. It will be entirely based on Fedspeak. It's by Marc Shivers and it's called "The Talking Fed." Check it out.
Happy Monday!
William,
Thanks for the plug for The Talking Fed!
I fully agreed with the "kicking and screaming" part, until I read Yellen's speech. It seems there's a larger constituency within the Fed for 50bps than I thought. It's going to be an interesting week...
-Marc