We think the ISM services number is one of the worst monthly pieces of data there are. On a month-to-month basis, it has no correlation with service sector employment, and on a quarter to quarter basis, it has no correlation with service sector gross domestic product. |
We're not going to be in a recession if the economy reverses quickly. But if the war keeps going on, recession is a major risk. |
We've been trying to see whether the improvement of the economy and financial market will carry the day in terms of consumer confidence, or if worries about labor will dominate. It looks like the 'glass-half-full' view is winning. |
We've gone from a period where there was a reasonable chance the Fed might cut rates just four months ago to one in which the Fed is very much comfortably just sitting on hold for now. |
What happened is that initially the market breathed a sigh of relief when the storm was downgraded to a Category 4 and missed New Orleans, ... they are starting to look at the damage more seriously. We are seeing further upward pressure on oil prices. People are starting to think about the many aspects of the destruction here. |
What we're assuming is that as the Fed hikes rates, the bond market gets pulled along. |
What we're looking for is evidence of the corporate side of the economy gaining confidence and making real commitments in its own spending. There, I'd say the news is at best mixed, |
What's happened between now and then is that we've accomplished everything we've set out to achieve, ... Then they were trying to get the economy to the state it is in now, so the attitude now is, 'lets not screw anything up.' |
When you get a new chairman in place you're going to have a more democratic and less predictable, less transparent Fed. The new chairman won't get the same automatic respect Greenspan has. It's not that (central bankers) will turn into a bunch of farm-yard animals, but there will be a more normal discussion going on. |
While the Fed is more than one person, Mr. Greenspan's retirement means less confidence in the Fed, with somewhat greater risk of both financial market instability and inflation. |
Whoever is chosen, the new chairman will go through a proving period. |
With few signs that consumer prices are about to break to the upside ... along with signs that aggregate demand remains robust, we expect the Fed will not only vote to keep rates constant, but will leave the growth and inflation bias statements unchanged. |
With inflation trending up, we believe the Fed will want to stay on the tight side of neutral for an extended period. |
You are seeing a nice rebound from the hurricane-distorted fourth quarter, with strength broadly based across the economy. |
You don't want to force the new chairman to open his term by having to make a a 50 basis point rate hike. |