May

9

 Rather than watch the paint dry on my screens, I am going to burn some calories at the gym, and return to watch the post-FOMC spasm. I'm sharing this seemingly pointless anecdote as a roundabout segue into my Fed meeting thoughts.

Like countless other bond geeks, I went over the last meeting's statement with a highlighter and pencil, ticking off the key Talmudic phrases.

I can see no reason they can't reissue identical wording this time around. Naturally, any change will be hyper-scrutinized, and there's always the possibility they'll be panicked/stampeded by the overwhelming doomsterism in the media.

But we get two more rounds of inflation data, and another jobs print, before the end-of-June two-day Fed confab, plus another round of data before the July Bernanke testimony on Capitol Hill.

Today, there's certainly no reason for them to do or say anything other than "adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."

John Floyd adds:

Of the economic data released in the last month, eight indicators have been below consensus expectations, eight have been above expectations, and the rest have been on expectations. Financial market indicators such as stocks, the dollar, and spreads have been stimulating.

Since the last meeting on March 21, March 08 Eurodollars have moved from a 4.600 yield to 4.915 yield (this is just price change, doesn't include curve roll-down). Some subtle shifts in the growth and inflation tradeoff, but given the differences in Greenspan's and Bernanke's approaches, I would concur the probability of any changes seems low.

James Tar remarks:

Early in the tenure of the current Fed Chair, I was critical of his public discussion of inflation, interest rates, the dollar and the economy. And we all know of his gaffe with CNBC's poster girl.

Over the course of the last 12 months, I have become an adoring fan. Not once has he made a mistake in discussions and forecasts regarding the overall progress of the economy. He has not been wrong. Not once.

What we should all pay attention to in today's statement is the Fed's forecast for a continuation and recycling of strength in economic activity in the later part of this year. If GDP progress is going to continue, corporate profits can only go much further beyond present market expectations.


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