place your bets here for the fed meeting this week!

[unblock]

here's my bet, going out on a limb:

50bps hike with a clear statement that this brings to an end the long campaign of rate hikes (with the standard boilerplate about remaining vigilant, yada yada).

[swag]

1. I think 25 bps on Thursday, a bias statement that says future decisions

will be data driven, balancing the risks between inflation and a recession. There will be the slightest hint of a pause in the bias statement.

And I think there will be a 25 bps hike in August and that will be it.

Good luck. I wouldn't be disappointed at all to see a 50 bps hike on Thursday with a statement from the Fed saying, "That's it." But I don't think they'll do that, even though Jeremy Siegel and Larry Kudlow, among others, have suggested it.

On a related note, I expect the Fed to start lowering rates again come next March or April.

[Jacobin]

2. agreed

They are going to go slow until after the November elections

[swag]

3. Okay, here's Allen Sinai's very off-consensus view.

He thinks the Fed won't even stop after 5.5%:

"We no longer have a stable low-digit rate of inflation ... the better choice is to stuff the one hand and one leg back into the bottle before the whole (inflation) genie gets out," says Allen Sinai of Decision Economics, who expects the Fed to eventually raise its target for short-term rates to 5.75% to 6%.

http://www.9news.com/acm_news.aspx?OSGNAME=KUSA&IKOBJECTID=108bc984-0abe-421a-010b-5ca8184bd8f5&TEMPLATEID=0c76dce6-ac1f-02d8-0047-c589c01ca7bf

on edit: Sinai also sees a 25 bps hike Thursday with more hawking language on inflation (.pdf linked):

http://www.wrhambrecht.com/sinai/forecast_calendar/current.pdf

Sorry if people don't like Sinai. I've followed him for a long time on inflation.

[unblock]

4. the whole thing is more than a little bit whack, imho

anyone who can look at years of crude oil more at triple what it was a few years ago and think that inflation is well contained is smoking something. but then again, maybe that's part of the game.

the biggest factor of all affecting inflation is the expectation of inflation. by cooking the books on inflation statistics to generate artificially low numbers, the government has set it up so that people can have their nice little fairy tale of low inflation while actual prices clearly skyrocket. this perversely lets prices rise while keeping expectations low (albeit through subterfuge).

of course, the cooking of the books is a bit of an open secret, so the "low inflation expectations" thing becomes another mania, like tulip bulbs or tech stocks. everyone "knows" inflation expectations aren't aligned with reality, but there's good money to be made until reality actually sets in.

if the fed were completely honest, they would indeed have to continue to raise rates, assuming they view inflation as more important then keeping the economy going, which is the now-standard view, ever since the government started protecting those with assets more than those needing jobs.

[swag]

5. Interesting. Barclay's raised their Fed funds forecast to 6% by the way.

I think I'll raise the automatic deposit to my online savings account just a bit.

[swag]

6. Kick for more bets.

I've read analyst stuff all over the place on this now.