Fed May Double Rate Target for 12/04 (to 2% - but some guess 2.25%)

[papau]

Fed May Double Rate Target This Year, Bond Firms Say


http://quote.bloomberg.com/apps/news?pid=10000103&sid=aeoO9p9B682s&refer=news_index

Fed May Double Rate Target This Year, Bond Firms Say (Update2)
June 10 (Bloomberg) -- The Federal Reserve will at least double its 1 percent interest-rate target for overnight loans between banks by year-end, a majority of economists at Wall Street's largest bond-trading firms said.

The addition of 1.2 million jobs this year, at a monthly average of 316,000 since March, has some economists doubting the central bank can keep its May 4 pledge to raise interest rates at a ``measured'' pace without risking faster inflation.

``You're going to see `measured' disappear from their rhetoric within the next few months,'' said Larry Kantor, 51, head of economics and market strategy in New York at Barclays Capital Inc. and a former Fed economist. ``The Fed actually needs to slow things down.''

Economists at 10 of the 23 primary U.S. government securities dealers that trade with the Fed's New York branch said the so-called federal funds rate will be 2 percent by year-end, according to a Bloomberg News survey. Barclays and J.P. Morgan Chase & Co. are among four firms saying it will be 2.25 percent. Barclays forecasts a quarter-percentage point increase this month and half-point boosts in August and November. <snip>

[tritsofme]

1. I say 50 points in June

Then hands off until after the election, regardless of consequences down the road.

And then things will get very tight.

[rapier]

2. rant

It hardly matters what the Fed does because, and most people forget this, especially the 'free market' true believers, THE MARKET has sent rates soaring for all maturites over the last two months.

Yes, the management of perceptions of the economy by Al is important and that has been Al's main job forever. Never mind that such isn't really supposed to be among the Feds jobs but you see Al is the ultimate statist. All that Anne Rand in his past and libertarian stuff is the a load of crap.

Note that the financial world is in a tizzy about job growth. FINALLY, the economy is generating jobs at a normal rate, still below what one should expect from a 'recovery' but yes growth, and the 'market' is appalled. The sudden consensus is that rates HAVE TO BE RAISED BECAUSE JOBS ARE GROWING. Never mind that wage inflation is still non existenet. That all CPI inflation is commodity, import and service based, and that financial asset and real estate inflation is continuing apace. The minds of Al and the financial world can not tolerate the concept of job growth and even the hint that workets MIGHT actually imagine they can get a raise. THE HORROR!!!!!

San Diego County homeowners on average made $900+ a day last month, on paper, due to housing inflation but that's good evidently. That's real wealth creation according to the new improved world of free market economics where inflation of assets is good and paying someone for work is the ultimate evil and roadblock to 'growth'.

That such is acceptable to residents of a democracy where it is supposed people vote in their own pocketbook interests is astounding. Well not so much if one appreciates that the have nots, not having assets that is, don't vote. Most remaining voters want, expect and in fact assume that their stocks and their homes will inflate forever at double digit rates. They in fact belive it is their due, being told for two decades that is how 'free markets' work. Free markets work by endless inflation of assets they believe. (Total debt may have risen by 68% over the last 6 years but the association of this with that asset inflation is sublimely ignored) We are told, again for the umpteenth election cycle, that both parties are concentrating on the undecided portion of the ever shrinking electorate. Exactly how stupid does the Democratic Party have to be to see that this game of diminishing returns has caused not only the near death of the party but has put the Repubilc itself on the road to ruin.

As to Al's discount/fed funds rate moves I'll side with the one raise till election view. While that rate has very little to do with the real world economy it is still so very important to Al's managenemt of perception. All the rate Hawkish blathering by Al recently has helped save the dollar yet again. With Asian central banks continued stupendous accumulation of dollars it is vital to pretend that he is serious about 'fighting inflation'. To the extent that the Feds fiddleing can support the dollar, if only a half point raise by Al can do the job then that is all that needs be done.

IF, and this is non economic,,, IF, somehow, the thin veneer of political legitimacy of the American government itself should crack then all bets are off on dollar stability and in turn on the stability of the entire debt bloated financial world.