Fed On Pause – For Now

June 25, 2008 at 11:27 am  ·  Category: Federal Reserve, Market Commentary

Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased.

Fed Statement, June 25

After 7 consecutive cuts in the Fed Funds rate from 5.25% down to 2% over the last 7-8 months, the Fed paused at 2% today.

I think this is pretty much a non-event in so far as this is almost exactly what markets had already priced in.  If anything, markets might have been expecting a little more hawkishness on inflation in the statement, in light of all the jawboning Fed officials have been doing on the dollar and inflation of late.

I think the Fed, along with the entire investment community, is pretty much in wait and see mode and consequently I don’t expect too much action in markets for the foreseeable future.  There will be a next phase but for now it’s back to the waiting game.

Posted by Greg Feirman  ·  Trackback URL  ·  Link