Gary Thayer
Gary Thayer
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Clearly today's numbers show that the economy is still healthy and that the Federal Reserve probably will still be concerned about inflation for at least a couple more months.
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Claims are still suggesting that the economy started the year with a strong employment situation.
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If sales can be sustained at this level, that would help support housing construction, but inventory of new homes is still increasing. The housing market is cooling off, but not dropping sharply.
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Generally I think these numbers could reduce some of the concerns about a quick or dramatic change in Fed policy.
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Inflation is creeping up, but it's not out of hand. I think that's pretty important. The bond market may have discounted a worst-case scenario over the last couple of months on inflation, and now maybe traders won't have to worry about the Fed moving too fast.
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But it looks like Mr. Greenspan is saying the slowdown in the economy will be short-lived and that suggests that the Fed will probably continue to raise rates.
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He's mentioning that the dollar should stay firm and that's been a good factor for our economy. He's been concerned for some time about foreign investors wanting to keep their money here and if we keep our policies in line that should hold for a while.
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It speeds up the time that the Fed will probably think about raising rates and that's negative for fixed-income.
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The October home sales data were strong, but we are seeing more moderate price increases for new homes suggesting that the housing market is gradually cooling off.
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It's a good number for the economy. Labor markets are improving, and that increases the likelihood that the economy will remain strong.
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It's a good decline in prices for a change. It appears the big drop in energy prices during November has brought the overall inflation rate down considerably.
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It's a little softer than expected, but it's not all bad news.
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It probably doesn't mean we don't see another rate increase, but it suggests that the Fed is not behind the curve and inflation is not getting out of control.
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It suggests the Fed is going to be watching closely to see if it is time to start taking back rate cuts. I don't think he is saying that is imminent, but his tone is that it might be sooner rather than later.