Rates cuts are coming! It's June 25, 2003

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Fed Interest rate dropped down to 1% yesterday.

Fed statement said that the US economy had slowed dramatically.
The Feds statement yesterday about the US economy struck me as puzzling to say the least.
To only concede that the US economy was in trouble, yesterday, seems strange.

The US budget deficit has been growing since 2001.
The US trade deficit has been growing since 2001.
Net US job losses have grown since 2004.
And the policy of deliberately depreciating the dollar has not helped.
Foreign holdings of US currency have grown rapidly since early this decade.
If those dollars start to migrate back to the US, oh dear, oh dear.

I have a lot of sympathy for Bernie.
He's left to do the janitors duties after Mr Greenspam and his failed policies.

Meanwhile Bank of England interest rate = 4.5%
ECB rate = 3.75%.
Reserve Bank of Australia cash interest rate = 6.5%, and that has been cut over the past 2 months from 8.0% and has been even higher.

Reserve Bank of Australia cash interest rate = 6.5%, and that has been cut over the past 2 months from 8.0% and has been even higher.


ECB rate increased from 4.0% to 4.25% in mid 2008.
ECB rate had actually increased from late 2006 up to 4.0% level.

Granted the ECB did drop their interest rate by 0.5% in October 08.

Now that EU inflation is downward, the ECB, correctly in my opinion, looks like it will drop interest rates now that the EU inflation rate is finally moving downward.

http://www.ft.com/cms/s/a492ab28-bd49-11dd-bba1-0000779fd18c,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fa492ab28-bd49-11dd-bba1-0000779fd18c.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fmarkets

Yep, inflation in Europe has dropped significantly and the ECB, correctly, has lowered interest rates today by 75 basis points.
Good decision,

Jean-Claude Trichet, President of the ECB,
Lucas Papademos, Vice-President of the ECB
Brussels, 4 December 2008

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference here in Brussels.
I would like to thank Governor Quaden for his kind hospitality and to express our special gratitude to his staff for the excellent organisation of the meeting of the Governing Council.

We will now report on the outcome of today’s meeting, which was also attended by Mrs Lagarde, President of the ECOFIN Council, and Commissioner Almunia.

On the basis of its regular economic and monetary analyses, the Governing Council decided to reduce the key ECB interest rates by a further 75 basis points.

This step follows the two 50-basis point reductions in the key ECB interest rates announced on 8 October and 6 November 2008.
Overall, since our last meeting, the evidence that inflationary pressures are diminishing further has increased and, looking forward, inflation rates are expected to be in line with price stability over the policy-relevant horizon, supporting the purchasing power of incomes and savings.
The decline in inflation rates is due mainly to the fall in commodity prices and the significant slowdown in economic activity. Largely related to the effects of the intensification and broadening of the financial turmoil, both global demand and euro area demand are likely to be dampened for a protracted period of time.
At the same time, while the underlying pace of monetary expansion has remained strong, it has continued to decelerate further.
All in all, the level of uncertainty remains exceptionally high.
The Governing Council will continue to keep inflation expectations firmly anchored in line with its medium-term objective.
In so doing, it supports sustainable growth and employment and contributes to financial stability.
Accordingly, we will continue to monitor very closely all developments over the period ahead.

Basket case.



Wall St pessimistic on dire jobs numbers
By Alistair Gray in New York

Published: December 5 2008 13:52 | Last updated: December 5 2008 13:52

Wall Street stocks were set for a sharply lower start on Friday after a dire reading of US employment shocked traders.

Futures took a turn for the worse after closely-watched Labor Department figures showed employers outside the agricultural sector slashed payrolls by 533,000 last month, the deepest contraction since December 1974 and much worse than expected.

The market sold-off sharply in the final hour of the previous session as traders positioned themselves ahead of the report, but the figures on Friday morning were worse than even the most bearish predictions.

Median forecasts had indicated a decline of 335,000, according to Bloomberg data, although some analysts forecast a loss in excess of 400,000. The data reinforced fears that the yearlong recession was worsening.

“Dire. The November employment report was staggeringly poor, even for a market increasingly inured to ugly data,” said Alan Ruskin, analyst at RBS. “There are simply no redeeming features in this data. Weakness is evident everywhere.”

However, he added: ”There is some feeling that at least in terms of the speed of the descent, the economy may be close to its weakest point. This and the obvious limited investor appetite to take risk is restraining the reaction to data.”

Indeed.

Just watching the US interest rate, the ever depreciating dollar - a flight to safety would seem to be on the cards.

The EURO is appreciating strongly on the currency markets.
EURO value appreciation is weighted more toward to the weakness of the dollar and sterling, rather than an inherent EURO strength.

It might just be the case that the ultimate safe haven in all of this - could well be gold.

Watch that commodity price.