Wednesday, November 28, 2007

Fed Backtracks on Hawkish Stance

Previously I posted how absurd the Fed's statements were weeks ago that growth and inflation risks were relatively equal. Now Donald Kohn is helping the Fed to backtrack and setting the stage for a much needed rate cut in December.........

Rate-Cut Hopes Lift Stocks

Stocks took a bull run on Wednesday, spurred by non-stop good news, including rising hopes for a Fed rate cut, signs of recovery in the battered financial sector and a stabilizing dollar.....

.......There was at least one spark for the day's gains, however: rekindled hopes for a further rate cut by the Federal Reserve. Fed Vice Chairman
Donald Kohn said credit conditions had deteriorated again in previous weeks, and suggested the Fed could step in to bolster the economy. The remarks seemed less hawkish than those of other Fed speakers recently, implying the Fed might be more inclined to cut rates at its next policy meeting on Dec. 11.

"The Fed is giving the market hope for rate cuts…while financials are going through some self-help," said Alan Gayle, senior investment strategist.......


WSJ link here

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