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Do as I do, not as I say!

Author: Bob Lang (info)
Website: http://trade-mentor.com
Posted: November 28th, 2006 at 11:52 pm EST
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In front of a very interested audience, Fed Chairman Ben Bernanke gave some rather pointed remarks about the economy, inflation and housing.  To a man, the Chairman still considers core inflation ‘worrisome’.  Interesting, indeed.  Certainly that’s been the mantra among Bernanke and his colleagues for many months.  But once again, they have been proven wrong.  Perhaps the ‘data dependent’ mentality is the right approach, rather than shoot first and ask questions later.  CPI and PPI data reflect a disturbing trend, one that may portray a deflationary cycle just beginning.  The last couple of reads on these inflation gauges have shown contraction in prices….and at the end of the day, isn’t that what the Fed is concerned with, price stability?  While Bernanke and his colleagues may be talking tough on inflation (stated very explicitly today), their actions (or inaction?) point to the fact they do not KNOW what to expect.  Jawboning inflation has a muted affect over the bond market, as those players have already discounted any inflation, replaced by the expectation of rate cuts in the beginning of 2007.  Mr. Bernanke made some soothing comments about the economy, which continues to hum along nicely.  No reference to slowing growth, other than in housing…which interestingly enough, former Chairman Greenspan stated today that it appears the worst is behind us. 

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