Wednesday, May 21, 2008

FOMC Bathtub Cheese

Stock market tanking after the FOMC release:

At its April 30 meeting the FOMC decided to cut the fed funds rate by 25 basis points to 2.00%, in what it called a "close call."  The Fed expects unemployment will "increase significantly," raising its 2008 forecast to 5.6% from 5.25%. In addition, many officials forecast negative GDP growth in the first half, and the Fed cut its 2008 GDP growth forecast to between 0.3% and 1.2% from between 1.3% and 2.0%. However, inflation risks have increased, with the Fed raising its core-inflation forecast to between 2.2% and 2.4% from between 2.0% and 2.2%. Dallas Fed President Fisher and Philadelphia Fed President Plosser dissented against the rate cut on inflation concerns.

Again, worried about the inflation gremlins that don't show up in any official release numbers and seem to be only cooked up by inflation conspiracy theorists and those who sell black market bathtub cheese.  They forecast negative GDP growth for the first half, when the first quarter was .6% and likely to be revised upward to 1%.  And in the second quarter, folks are rushing out with their rebate checks to Best Buy, Costco and the Cheesecake Factory. 

I'm not buying the gloom and doom or the bathtub cheese.

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