Fed Announcement Today: Put down your Dictionaries and Back Away Slowly

Fed Announcement Today: Put down your Dictionaries and Back Away Slowly

August 9, 2005

Fed Announcement Today: Put down your Dictionaries and Back Away Slowly

Fed watchers are gathering silently on the lawn of the Federal Reserve Board today awaiting the big announcement. At 2:15PM the Federal Open Market Committee is going to issue a memo announcing that they have decided to increase their Fed funds target by one-quarter of one percentage point, from 3.25% to 3.5%, which everyone, and I mean everyone, has known for weeks.

Yesterday, my neighbor’s gardener waved me down as I drove past and asked me if I thought there was any chance the Fed would do a half today instead of a quarter. Told him no. He didn’t think so either.

They the Fed watchers will carefully examine the memo, checking its wording, its spelling, its punctuation, and the rag content of the paper it is printed on.

My personal position is 3.5%, exactly the same words, 2 spelling errors, a comma changed to a semi-colon in the second to last line (Is this significant?), and 25% rag content. I am neutral on the ink color.

Last time the Fed watchers got pretty excited about what looked like a change in wording, but it turned out to be drool from one of the older members who fell asleep while signing the memo. False alarm.

The FOMC members, of course, have been watching out the windows all day, wondering how the Fed watchers will interpret their words. The psychology so thick you can cut it with a chain saw.

More on this later in the day. I have to get geared up for the 2:15PM announcement.

JR

PS: This viewpoint is going to anger approximately 1500 PhD’s at the Fed and lots more Fed watchers than that. Can’t be helped.

John Rutledge

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