Will The Fed Pause?

by Alex Stenback on September 6, 2005

Greenspan_pauseA meme that’s going to get a lot of play in the weeks preceding the next Fed meeting will be that the Fed will pause or halt their current tightening round as a result of Katrina, high fuel costs, and the resultant negative impact on our economy.  Economic pundits of every stripe have begun weighing-in on this, following (after the jump) we’ve linked and excerpted a number of articles on this topic, but most share three central points in support of a pause:

1.  Spiking/high fuel costs create a lot of economic friction, which offset need for more hikes.
2.  Katrina will have huge costs, and the negative after-effects on jobs, spending etc. will drag on the economy.
3.  The housing market, which is the de facto target of this recent round of tightening, is already showing signs of slowing.

Greenspan: Time to Call an Audible [frontlinethoughts]
"Quarterback Greenspan should come to the Fed meeting September 20 and call an audible. He now has the perfect excuse. They should not raise rates, announcing that they would like more time to assess the affect of Katrina on the economy. With the properly worded Fed release, no one would think he (or the Fed) had lost his rate hike nerve. It is just the Chairman acting with wisdom and restraint."
All Eyes on The Fed [cbsmarketwatch]
"With little hard data to go by save weekly jobless claims — which will likely be skewed upward by job losses in the Gulf region, assuming people can get to their local Labor Department offices to check in — the Fed should pause. We’re not talking about massive injections of liquidity here, just not taking any more out."
Fed May Pause for Political Reasons [bloomberg.com]
"Will the Fed’s response mirror the market’s expectation, which has turned on a dime in the wake of Katrina’s devastation? The answer isn’t just a question of policy. Politics may be involved as well."

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