Vital Market Signs at Selected Prior FOMC Meetings
September 16, 2008
| EUR/$ | $/JPY | 10Y, % | DJIA | Oil, $ | |
| 06/30/04 | 1.2173 | 109.44 | 4.63 | 10396 | 37.95 |
| 06/29/06 | 1.2527 | 116.07 | 5.20 | 11077 | 73.41 |
| 08/07/07 | 1.3749 | 118.55 | 4.73 | 13510 | 72.27 |
| 12/11/07 | 1.4682 | 111.49 | 4.11 | 13645 | 89.78 |
| 01/30/08 | 1.4792 | 107.31 | 3.70 | 12454 | 91.70 |
| 03/18/08 | 1.5786 | 98.73 | 3.41 | 12257 | 107.53 |
| 04/30/08 | 1.5562 | 104.58 | 3.83 | 12953 | 111.54 |
| 06/25/08 | 1.5568 | 108.37 | 4.18 | 11837 | 133.62 |
| 08/05/08 | 1.5445 | 108.42 | 3.97 | 11484 | 119.82 |
| 09/16/08 | 1.4205 | 103.78 | 3.28 | 10918 | 93.05 |
Markets are praying that the FOMC delivers some kind of rate cut at 18:15 GMT today. A 25-basis point reduction of the Fed funds rate to 1.75% is discounted, but investors really would like something more aggressive. A 2.0% rate level has been in place since April 30th, and Dallas FRB President Fisher dissented in favor of an increase at both the June and August meetings. Being from an oil producing-state that just got clobbered by Hurricane Ike, he’s unlikely to stand apart this time. Oil prices are down 22.3% from when the FOMC met on August 5th, off 30.4% from the late-June meeting, and just 15% above their average level in 2H07. The dollar is 8.7% stronger against the euro but 4.3% weaker against the yen than on August 5th. It’s trade-weighted drop rise of 5%, if sustained, can be expected to exert as much drag on U.S. growth as at least a 50-basis point rate increase. This impact is likely to be magnified by worsening demand conditions in America’s export markets. Long-term rates are 71 basis points softer than when the FOMC met previously, and the Dow Jones Industrial average has fallen 5%. Most importantly, money markets have seized up, and it is unlikely that better-than-projected U.S. growth in 2Q08 and early in the third quarter will be sustained.
Tags: Dollar
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