Today at 2:15 PM EST (plus or minus a few minutes) we’ll get the FOMC decision on interest rates, but investors are not expecting any rate change and that is with reason.
We already had the 17 consecutive rate hikes, and there was not one single hike different than the 0.25% auto-pilot hike. You can probably expect the Fed to say they have noticed the weakening economy with expansion expected to be at a moderate pace. They will also likely say that inflationary pressures still pose a risk, but they have to say that.
Even if inflation stays at current levels or ticks up a tad, the Fed cannot risk fighting an extra 0.5% in higher prices to the point the break the growth engine. Right now everyone seems focused on the minute details in the numbers coming out, but all in all the Fed did its job. Manufacturing has slowed, the housing bubble popped and broke some of the weakest links, weak auto sales are still present, a tight job market has stabilized, mixed retail results in the middle and lower-end store levels have set in, the dollar has weakened, and even government forecasts for 2007 GDP are lower but still positive.
Everyone wanted to know what a soft landing looks like, and this is it.
HERE is the last FOMC statement at the October 25, 2006 meeting. Most are not expecting the overall statement to change that much except maybe even more notes about a weaker housing market. The next meeting is a two day meeting from January 30 to January 31, and by then the Fed will have gotten a chance to look over some DJIA component earnings and their forecasts for 2007.
Jon C. Ogg
December 12, 2006
Top Gaining Stocks
Top Losing Stocks