Monday, July 9, 2007

The Fed’s Delicate Balancing Act

excerpts from this week's report

"One year and counting.

Time flies when you are having fun as the economy marks the one year anniversary since the Fed set its funds rate at the 5 ¼% level.

So, it seems worthwhile to compare the FOMC statement from a year ago (June 29, 2006) with the one issued last week (June 28, 2007). Yet, it is also worthwhile to consider factors outside the FOMC decision and statement to help get a more complete picture of the balancing act that the Fed is faced with..."

"Gone are such phrases as a “cooling of the housing market” and the “lagged effects of increases in interest rates and energy prices”, despite the fact that all these issues remain very much on the minds of investors and many economists. However, relying solely (or even predominantly) on the FOMC statement and actions leaves an investor with a very incomplete picture.

To round out the Fed’s view of the world, it is advisable to..."

Investment Strategy Implications

"Contrary to the more traditionally thinking economic advisors, it does seem fairly clear that living in the era of globalization and financial innovation warrants a more comprehensive and even out-of-the-box perspective on economic conditions. Accordingly, as long as the Fed remains vigilant to the non-traditional aspects of a transitional world economy, the odds of a fat tail episode and a financially-induced downward spiral are diminished. However, the odds are not zero. Whether they can pull this off while sustaining global growth with moderate inflation remains to be seen."

also in this week's report

* Current Blue Marble Research Fed Model
* Model Growth Portfolio
* Key Economic Indicators

Note: To view this week's report, please click on the Blue Marble Research services link to your left.

No comments: