Fed May Alter Statement

Fed watchers beware. Greenspan & Co. may alter the language in tomorrow’s post-meeting statement:

Lehman Brothers Inc. and Banc of America Securities LLC are among 12 of the 22 primary dealers of U.S. government securities that say the central bank will stop saying interest rates provide “accommodation,” meaning they are low enough to spur economic growth. All 22 expect the Fed to lift its key rate to 4.25 percent from 4 percent.
Removing that one word from the Fed statement explaining policy decisions may fuel the debate between economists and investors over whether the central bank is almost finished raising rates, setting the stage for a rally.
“The message they want to convey is that they are still concerned about inflation and that they will continue to raise rates until inflation pressures subside,” said Joseph Abate, a senior economist at Lehman in New York. “It’s not difficult to reconcile the Fed keeping the ‘measured’ language in there but altering the accommodative language.”
Fifteen dealers predict policy makers will repeat rates are likely to rise at a “measured” pace, citing the potential for faster inflation.

Here’s more on what the Fed needs to consider.

Posted by on December 12th, 2005 at 2:24 pm


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