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September 20, 2005
Wondering why stocks are sliding in reaction to the Federal Reserve's decision to raise rates another quarter point? It's because the Fed says it will maintain its policy of "measured" rate hikes into the future. (Here's a link to the Fed's statement).
That little (well, not so little), word dashed traders hopes that the Fed would soon stop its rate-hiking ways because of the damaged to the economy wreaked by Hurricane Katrina.
Sorry folks, the Fed sees that Katrina cuts both ways when it comes to inflation -- it raised the price of oil, which may translate into higher consumer prices for a range of goods at the same time that it slowed economic output by demolishing a major American city and port.
Michael Panzner, head trader at Rabo Securities, notes that some investors took solace immediately after the Fed's decision was announced in the fact that it was not unanimous (maybe that signals a slight move in the direction of taking a break from future rate hikes?).
Panzner doesn't think so. "Sounds like some of these guys need a hearing check," he wrote to clients today. "My guess is, the sound of the share prices cracking hard as the day wears on may just do the trick."
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Posted by: guest at October 23, 2005 06:26 AM