Rory Robertson
Rory Robertson
beyond clear inflation minimal percent players pressures value year
It's very clear that there's minimal inflation pressures in the U.S. beyond the oil-price pressures. A lot of fundamental players will see value in the 10- year Treasuries at 4.8 percent levels.
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At this stage, the worst-case scenario for the US economy post-Katrina simply is not playing out.
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There's a perception that the economy is actually doing quite well, in particular the labor market. It's a fairly straightforward assumption the Fed would want to hike rates in March and perhaps in May. You might see bond yields go higher.
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The inflation risk is less intense than many would imagine and, as energy prices edge lower, some investors are seeing value at current yields. It helps reduce the pressure the Fed has been worried about.
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All the good growth is in the forecasts, in the idea that financial conditions have eased. But we've seen that doesn't always turn into actual good growth.
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The markets were a little disappointed that the Fed didn't give any explicit hint that a pause is around the corner.
coming dream economy extended inclined justify low markets period rates strong understand
The markets are coming to understand that policymakers will be inclined to keep rates very low for an extended period -- the FOMC (Fed rate-setting committee) can still only dream that the economy will be strong enough in 2002 to justify a rate hike.
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The lesson from Australia is, as long as interest rates stay relatively low, the market will cool, not crash.
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The longer the Fed drags this out without cutting rates, the more they're admitting they don't have much firepower at all. They're sitting on their hands, hoping for the best.
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I think it's going to be 50 basis points because the Fed is worried about the economy, and I think the accompanying statement will reflect that.
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I think the back-up in rates should rate a mention -- it's the most significant thing that's happened to the economy in the past seven weeks.
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It's too early to say with great confidence that things are definitely getting worse, but if we get another month or two of payrolls declines, there won't be any shortage of people saying a double dip has started.
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It leaves open the door for the Reserve Bank to raise official interest rates sooner rather than later.
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The Fed is trying to do what it can, but the history of the past 200 years is that big booms tend to end badly -- big equity market booms in particular. The Fed so far has done a magnificent job of holding the show together, but we don't know what effects of the bubble are still in the pipeline.