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Fed Meeting Preview: Action Speaks Louder Than Words


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In just 44 short days since the Federal Reserve's last meeting in late January, much has happened that could have potentially swayed the rate setting panel's assessment of the economy, and yet, it won't.

Stocks are climbing, Europe is progressing, unemployment is easing, consumers are spending, gasoline is soaring and temperatures are rising but none of it will cause the Fed to budge.

"I believe that (Bernanke) would rather be known as the Fed chair responsible for 2-3% inflation than 20-25% unemployment," says Doug Roberts, chief investment strategist of Channel Capital Research and author of the book, Follow the Fed.

This Fed is going no where in terms of rates for at least a few more years. Just as they said last summer, and at their last meeting, and on Capitol Hill last week, Bernanke's Fed remains in worry mode with a bias towards easing, despite increasingly clear signs that the economy has regained its footing enough to at least stand on its own. However odd or obvious this disparity might seem, Fed watchers like Doug Roberts are convinced that the next action will be easing rather than tightening.

"He (Bernanke) is starting to drop hints...in a recent speech he talked about sterilized bond purchases which might not be QE3 but suggests he's going to do something," Roberts says, and the mere thought of it is enough to "squeeze the shorts out of the market," which has of late pushed the S&P 500 back up to a 4 year high, and crammed 10 year Treasury yields below 2%.
It seems like the Fed is always in a different place than than I am on the state of the recovery. In '08 'and 09, when everyone could see that housing and jobs and GDP and confidence were swooning, Bernanke was reminding us how far we had come since the collapse of Bear Stearns, Lehman and AIG.

When the money spigot was opened, the dollar falling and prices of everything rising, this Fed was busy assuring us that fears of inflation were unfounded.

And now, just when some are finally starting to believe the evidence and acknowledge that there is light at the end of the tunnel, Bernanke and the Fed refuse to come to the party.

Yes, it seems the Fed is perpetually out of sync with Main Street. Of course the big concern is that both can't be right.