Thursday, June 29, 2006

Quarter for your thoughts 

The WSJ (subscribers link) parses the Federal Reserve's statement to suggest perhaps the Fed got a little more dovish. Notice the language that the economy is "cooler" and that May's "some further policy firming may yet be needed," they say. August Fed funds futures jumped 35 basis points, indicating all those who were betting on 5.5% in August aren't so sure now, so for a few weeks we'll keep guessing. The next big sign of which way we go should be the employment report a week from tomorrow. Everyone on Wall Street went long for the weekend, it appears. My reading is, they trust the Fed's statement on cooling economy and inflation. I expect more betting in that direction next week until the employment report and then the CPI/PPI numbers in mid-month.