Today's dismal news on inflation could cause Greenspan to go for a 50 bp rate hike next time.
One thing that the Fed has given up in the recent rate cycle is the ELEMENT OF SURPRISE..... And it was surprise that was the hallmark of the Fed in the past.
Can monetary policy really be effective when everyone knows what's going to happen and how....? Clearly, so far the answer is no...
By being so predictable the Fed may have to OVERSHOOT JUST TO REACH THEIR GOALS..... of neutral rates. And that would be unfortunate and unnecessary... If only Greenspan could muster the nerve to shock the markets with a 50 bp hike....the dollar would absolutely soar...and not just for one or two days...and the price of oil could very well plunge.
But then, we are in a post-post-bubble economy...and it has been an economy that has been warpped and twisted by the Fed to comply with Wall Streets demands....so a correction may be inevitable no matter what.
But a 50 bp hike would be "curative" on many levels and on many fronts.....if only Greenspan had the nerve to do it.
