Tuesday, September 29, 2009

Bill Gross: Deflation; Fisher: The Fed will Agressively Fight Inflation. Really?

Bill Gross told Bloomberg today that he has been buying longer maturity Treasuries recently as protection against deflation:

“There has been significant flattening on the long end of the curve,” Gross said in an interview from Newport Beach, California, with Bloomberg Radio. “This reflects the re-emergence of deflationary fears. The U.S. is at the center of de-levering as opposed to accelerating growth.”

At the same time, Fed officials warned that to prevent inflation from taking off, the Federal Reserve will need to start boosting interest rates quickly and aggressively "once the economy is back on firmer footing." (AP)

Richard Fisher, president of the Federal Reserve Bank of Dallas said: "I expect that when it comes time to tighten monetary policy, my colleagues and I will move with an alacrity that, if needed, will be equal in speed and intensity" to when the Fed was slashing rates to battle the recession and the financial crisis".

Mr. Fishers's comments are just part of the campaign to boost the U.S. Dollar, this is totally expected. The Fed won't raise interest rates anytime soon. They just talk about it. Everytime they talk, the dollar goes up. Talk is cheap...

Boosting even more the deflation case, rents are falling everywhere. See the article by Jonathan Lansner.

Inflation Mr. Fishers? Give us a break. Bill Gross is right.

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