runlikeanatelope

What the Fed's Latest Decision Means for Investors

Okay, inflation is an issue, but the fed has reason for delaying their tightening agenda:
1. Unemployment is straying away from their target rate, meaning new downside growth risks are present among the one's that are already there.
2. Oil prices are falling. Anyone who thinks they can target a source for this is kidding themselves, but let's say that it has something to do with a global econ. slowdown leading to weaker demand (and the CFTC, and Obama??, and alt energy demand...).
Now, if oil prices are falling, that means headline inflation risks are diminishing and headline will (fingers crossed) trend closer to core -- closing the gap between actual inflation rates and fed target rates. Downside growth risks (unemployment risks) are currently outweighing inflationary pressures as unemployment strays away and inflation trends toward fed targets.

Now, inflation is an issue -- it just isn't AS big an issue as it was last meeting when oil prices were sky high. With the gov't approving that housing bill, I see a compromise coming to solve the energy crisis: pursuing more oil (either offshore or SR) in exchange for higher CAFE standards...incentiviz... alt. energy and whatever else is thought of (also, with regard to food prices, I see them going down when we end our ethanol subsidies). I hate betting for inflation because it is betting that oil prices go up (and that we continue to increase our demand for oil), and who doesn't want to solve this energy crisis -- both its effect on our wallets and its effect on our planet.