Despite the greed players pumping the commodities markets, this party is coming to an end.
He tried to keep the language calm, but obviously energy prices are beginning to filter into other areas of the economy.
More hikes are coming.
yep i look more for an orderly decline in real estate. with the low end housing suffering more than the mid and upper. the money in real estate will flow to the market and propel it higher.
this may be in the process of unfolding as we speak. folks will feel great as they watch that 401k account grow and get way more speculative in their investments propelling this market to very stretched areas in 2008.
it will be the roaring 20's all over again. the 2000 bust was minor because it affected the naz stocks in the largest way. this time i expect it will raise all boats even more including the dow because we have many companies in this arena selling to india and china. which explains commodities rise.
RE prices have already droppped in the hot markets and speculation is dead. The Fed can do nothing about oil anymore as foreign demand is now the factor. Slowing our economy as a way to slow the global economy may work, but it will be hard. I think the Fed will pause here to see how things shake out over the summer. A slow vacation season in many parts of the country will cause a faster slow down and rates and gas prices are already doing their job slowing the economy. SO I think domestic demand-pull inflation is under control and the cost-push inflation in out of is control for the time being. The higher interest rates should support the dollar and slow the economy as well.
as usual I'm confused. energy prices are increasing and ultimetly effect cost of goods sold. higher fuel cost act as a tax and will eventually slow down the economy. thought the idea of raising interest rates was to slow down the economy...ie, real estate speculation.
if we are in agreement fuel cost will remain high...why does the fed need to continue to increase interest rates? shouldn't the high cost of energy slow the economy w/o interest rate hikes?
High energy prices drive inflation into the rest of the economy as workers and sectors seek higher wages/prices to offset soaring energy costs (gasoline, heating oil, etc.) Additionally high gasoline forces the transportation sectors to raise prices which will reflect in other segement (e.g. food prices, airline tix, etc, etc).
Raising rates is the tool to fight inflation, that is what the FED is worried about--forget the housing bubble, it has already popped and the fallout from that is another separate story. But the FED knows if inflation continues to ramp (that is what they are watching for in the stats) they will have to aggresively hike rates to try and smother it out....
Higher rates are designed to slow the economy, but in this case it is really the inflation they are worried about. Oil in the 70-100 a barrell range could trigger a nasty case of the 1970s all over again and that nobody wants.......