The Fed Army Talks On All Corners In The Week To Come

Sunday, June 11, 2006

Checking events of the coming week I am startled to see that Federal Reserve Chairman Ben Bernanke will give no less than 3 speeches within 5 days. He will be flanked by governors Bies, Kroszner and Olson, holding speeches to the public too. So will FOMC members Fisher, Pianalto and Poole. Altogether, expect to rest your eyes on 13 speeches from the Fed.
As if that would not be enough to guarantee a week of market gyrations, PPI, CPI, retail sales, industrial production and current account are only the most important in a multitude of macroeconomic indicators that could form another weekly pivot point in stocks, bonds, the $ and gold.
Check Econoday for a detailed list of events to come.
It can be expected that the Fed members will stay on their course of inflation warnings that may see a confirmation in PPI and CPI data on Tuesday and Wednesday. This data could help establish a feeling in markets that the Fed will not only talk but also act tough on increasing signs of inflation.
Bernanke has to fight on a second front too. Growing awareness of global imbalances which are basically a reversal of traditional debtor-creditor relations built in colonial times may suddenly direct all the Fed's forces to defend the dollar or import prices - and with them inflation - will rise further.
Favoring a hawkish policy I would not be surprised to see the Fed having to resort to a 50 basis point increase in the coming winter. The Fed still has time to catch up with real inflation but it has to be seen if it will act that tough.
For a veery graphical illustration of inflation click here.

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