Bond Outlook [by bridport & cie, August 9th 2006]
A pause in rate increases by the Fed it is. However, a pause is not an end, not while the inflationary pressures remain, both external (commodities and energy, and China no longer being deflationary) and internal (labour costs rising at 4.2% per annum versus productivity gains of 1.1%). Slowing economic growth is not in itself enough to stop cost-push inflation. Bernanke is now navigating in those very dangerous waters between pushing the US economy into recession and letting rip inflation, with the ever-present danger of both at once, i.e. |
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