Today is Chairman Bernanke’s day in front of the U.S. Senate
Banking Committee. The market is now
looking to the Fed for direction and all eyes will be glued to this testimony
and the Q&A that follows. The Fed’s
most recent official communication on more quantitative easing has been that
they “are prepared to take further action as appropriate to promote a stronger
economic recovery.” We will watch to see
if this language changes at all. We know
the FOMC Members are confounded right now. They do not want to have to take
more, unprecedented, unconventional action to spur on the economy. But with the rest of Washington out playing
duck-duck-goose, the Fed is the only policy-making group who can rise above
politics. There is an important reason
for that – the Fed is not necessarily a democracy. It will be important to remember, as we
handicap the Fed’s moves in the coming weeks, that Chairman Bernanke is the
most important voice to listen to.
CPI UNCHANGED IN JUNE, UP 0.2% AT CORE –
Consumer prices for the month of June were flat versus the
previous month. Excluding food and
energy costs, core prices rose 0.2%.
On a year-over-year basis, headline inflation is up 1.7%
while core inflation is up 2.2%.
The drop in energy prices continues to lead the headline
rate lower while a more modest impact has come from lower food prices. The recent drought in the U.S. Midwest has
caused some concern about corn prices which could put some upward pressure on
food prices. However, all signs continue to point to inflation continuing to
drop. At the core level, rents continue to be the biggest driver of higher
prices [this should be interesting to see how this plays out over the next year!]
The Market Today ONLINE
