The most important Fed meeting in 20 years?
By Grace Cheng on August 8, 2006 | More Posts By Grace Cheng | Author's Website
Today is THE DAY when the Fed will announce its interest rate decision at 1815 GMT. This FOMC meeting has been billed as one of the most important Fed meeting in the last 20 years because if the Fed even signals a peak in US interest rates, it would be the first time in 20 years that the Fed calls the peak in rates when inflation pressures still exist. If so, the Fed will lose its inflation-fighting credentials, and that will really shake the world. But I think that is very unlikely.
Right now, the US dollar is getting support from the assumption that the Fed will issue a hawkish statement, reflecting the underlying
strength of inflation pressures, and hinting at further rate rises in the future.
US dollar is also being supported by rising oil prices because higher energy costs are the main culprit of inflation pressures in the US now.
Crude oil prices rally after yesterday’s news that British Petroleum (BP)
has decided to shut down its production in Alaska because
of pipe leaks.
BP’s Alaskan output accounts for 8% of total crude production in the U.S. Nymex crude currently stands at $76.65.
Further crude price gains are also likely, as we still don’t see a fading out of the escalating tension between Israel and
Hezbollah in Lebanon.
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