Fed Officials Disagree, But Number of Hawks Growing

by: David Jackson

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Fed Officials Air Yin, Yang on Inflation Outlook [Reuters]

Summary: U.S. Fed President William Poole emphasised Thursday the risks to U.S. growth and implied that rate cuts may be required, while the same day Chicago Fed President Michael Moskow said the risk of excessive inflation outweighed the risk of insufficient growth. Quotes as follows. Poole: "If we came to the conclusion that the economy was really running in the direction that the bond market is currently predicting, then it seems to me that considering rate cuts is going to be highly appropriate". Moskow: "The risk of inflation remaining too high is greater than the risk of growth being too low. Thus, some additional firming of policy may yet be necessary." Moskow said that the September unemployment rate of 4.6% was "very low", that there were signs of labor shortages, and that the core personal consumption expenditures index (an inflation measure) has been running at or above 2% for 29 months, above the Fed's preferred zone of 1-2%. Moskow's comments bring to 5 the number of Fed officials who have played down the probability of rate cuts since October 4th.
Related links: Full text of Moskow speechBloomberg coverageBill Gross: Bond Prices Have Bottomed
Related ETFs: iShares Lehman TIPS Bond Fund (NYSEARCA:TIP) • iShares Lehman 20+ Year Treas Bond Fund (NYSEARCA:TLT)

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