June FED News

TRYING TO SQUASH A RUMOR IS LIKE TRYING TO UNRING A BELL…
meaning once the words are out there, they are out there, and are very hard to recall. And with last week's light news calendar, all ears were straining for any words from the Fed. Chairman Ben Bernanke had wanted a more open, understandable, clear Fed message - and it appears that the Fed Governors and Presidents took that message to heart, leaking their own opinions on the economy and inflation and rate hikes in just about every lecture that they give. And their words have been leading to rampant rumors and speculation in the markets over the Fed's next move due on June 29th - will they hike the Fed Funds Rate yet once again, or will they pause and provide a chance for all the recent hikes to "catch up", and be fully felt in the economy before going any further?

Historically, the Fed always goes too far, especially when there's a new Fed Chair in the house. When Alan Greenspan took over as Chairman in 1987, he felt the need to show he was tough on inflation, and over seven months persistently raised the Fed Funds Rate. And most of us know what happened next…in October of 1987, the stock market crashed, unemployment rates rose and home prices began to decline in many areas of the nation. Bernanke doesn't want to repeat any mistakes his predecessor made…but being under the gun to show that he'll fight inflation, is he destined to repeat past history? He's certainly in the crosshairs of the market - and perhaps he's rethinking all this open, understandable Fed Policy business…it's probably caused him some headaches of late.