Fed Notices Dollar, Hints To Rate Cut End

In "collaboration with our colleagues at the Treasury, we continue to carefully monitor developments in foreign exchange markets. The challenges that our economy has faced over the past year or so have generated some downward pressures on the foreign exchange value of the dollar, which have contributed to the unwelcome rise in import prices and consumer price inflation. We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate, including the risk of an erosion in longer-term inflation expectations. Over time, the Federal Reserve's commitment to both price stability and maximum sustainable employment and the underlying strengths of the U.S. economy--including flexible markets and robust innovation and productivity--will be key factors ensuring that the dollar remains a strong and stable currency."

I actually think Bernanke has it backwards on the dollar. It is not the Federal Reserve's "commitment to both price stability and maximum sustainable employment and the underlying strengths of the U.S. economy" that will result in a stable dollar. It is a stable dollar which will contribute to price stability and sustainable employment. Nevertheless, it is nice to see Bernanke at least acknowledge that the dollar is an important part of their policy decisions. The market is responding to the speech by bidding up the dollar against most currencies.

Source: By Al Hambra Investment Management http://alhambrablog.blogspot.com/

Federal Reserve Chairman Ben Bernanke signaled Tuesday that further interest rate cuts are unlikely because of concerns about inflation. High oil prices are a double-edged sword that can both put a damper on already weak growth and spread inflation, he said.

Many economists believe the Fed will hold rates steady at its next meeting on June 24-25 and probably through much, if not all, of this year. A few believe that inflation could flare up and force the Fed to begin boosting rates near the end of this year.

Source: By Ideal Investment Corner http://idealinvestment.blogspot.com/