Spiga

The Fed, what will it do?

Take this for example:

Three-month Libor is now 2.80%, or 0.96 percentage points above the effective
market rate that generally tracks the Fed's target. That spread, a measure of
banks' willingness to lend, is actually higher than it was in December when
signs of credit risk were more widespread as a lengthening line of banks have
announced multi-billion dollar writedowns. The gap was very narrow, at about
0.06 point, until August and credit crisis really took off.
As long as the
Libor rate is so much above fed funds, the U.S. central bank is unlikely to
tighten, said William O'Donnell, U.S. government bond strategist at UBS
Securities.


Although it is true that the consumer is not seeing the true benefit of falling shorter rates to steepen the yield curve and bring branks a spread to strengthen balance sheets - I do see something happening.

The Fed will move, in the next 60 days... raising the rate .25 bps. And leaving it alone until 2009. The Fed must telegraph a stance stronger then jawboning, that they are serious about stopping the inflation spiral, becouse into 2009 - that would mark two quarters of higher inflation, and thats perma inflation. The dollar drop started this move in vengence around the world. We must be the currency to stem it.

Type rest of the post here

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