All Things in Moderation

Markets are flat on no real news. Bonds and MBS are up small.

The post FOMC minutes rally was certainly short-lived as we had another bloodbath in stocks yesterday. For the time being, it seems like US markets will be driven more by overseas events than domestic ones.

Import prices fell .5% month over month in September.

As global growth slows, the dollar rallies and commodities fall. This adds to the Fed’s predicament of missing its inflation target – in that inflation is too low. Chicago Fed Head Charles Evans says the Fed needs to reaffirm its commitment to its 2% inflation target and to stress that it will act if inflation is too low. The market may be treating the 2% inflation rate as a ceiling, and not the central tendency of a target. Evans said the FOMC could set a deadline, say two years, for returning inflation to its goal. Until you start seeing wage inflation approaching 4% or so, the Fed will probably continue to miss its inflation target to the downside.

As rates fall, can we expect to see another refinancing boom? According to Freddie Mac, probably not.

If the Republicans take the Senate this November, here are some of the issues that they plan to address:  Medical devices tax, the Keystone pipeline, fast-track free trade. Another possibility – reining in the CFPB and making it subject to the appropriations process