What will the Fed do at the meeting later today? No one really knows except the FOMC members, but here’s my best guess. Recent economic data has been slowing, but core inflation has remained above the Fed’s comfort zone (2%). The recent surges in food and energy prices are unlikely to sway this decision much as the Fed is likely to view these price moves as “transitory”. Further, Europe seems to have bolstered confidence a bit (jaw boning is a good short-term strategy obviously) and the economic data in the USA is still very much mixed. Housing is showing some signs of stabilization, but manufacturing is appearing increasingly fragile. The employment picture is fragile, but still expanding.
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