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Happy markets but data leave questions
By Evelina M. Tainer, Chief Economist, Econoday
January 6, 2006
The minutes of the December 13 FOMC meeting confirmed the interpretation of the post-meeting statement. That is, it reinforced the belief that the Fed will not automatically increase the federal funds rate target by 25 basis points at each meeting as it has since June 2004. At 4.25 percent, the fed funds rate target is approaching the mid-point of the neutral range (as indicated by San Francisco Fed President Janet Yellen, although Boston Fed President Cathy Minehan claimed today that it is at least at the bottom of the neutral range). The market consensus calls for a 25 basis-point-rate hike on January 31 (Greenspan's last meeting), and many market players now believe that after this the Fed will stop raising rates known now as "one and done." In fact, the paragraph below, taken from the last third of the FOMC minutes, suggests that the Fed will have to determine what policy to pursue at each meeting, depending on current events and data. Nevertheless, it is indeed likely that the Fed will no longer be on automatic pilot in 2006.
Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such info may change
without notice. Econoday does not provide investment advice, and does not represent that any of the information or related analysis is accurate or complete at any time.
Consensus Data Sources: Econoday Consensus Survey
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