Sep

19

Be mindful of confusing cycles with hikes. This article on the Fed lists 14 cycles of tightening, and the current round of 17 hikes constitutes only one cycle.

While it is admitted that the Fed's actions are more transparent than in the past, a lot of the market participants are simply not looking. For example, currently the Fed has tightened the monetary base to the point at which it is 3.6 percent below the long-term fit (I contend the fit is a "target"). This level of tightness surpasses that of 1998 and 2001, and is only exceeded by 1990. This data is thru 9/13/2006, while certain players were talking of a Fed reversal of policy in August (and maybe before). Here is a quick visual illustrating the Fed's tightness

But note that there are not enough observations of the extremes of accommodative or restrictive policy to have statistical reliability, and thus the chart must be viewed as anecdotal.


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