warning signs coming up on the radar...

Warning signs coming up on the radar... and a bit from Bloomberg.

Japan is looking sick as surprisingly it slows again. This will also effect China (and then the rest of us ?)

Bush and Blair are on the ropes big time with their electorates.

Nov is election time in USA.

Will the tide turn disasterously against Bush during Oct in the build up to the elections ? Will Bush get so very badly clobbered that the American peoples see losing the rudder they have, albeit a weak Bush. The uncertainty going forward could be catastrophic.

Will rising rates be back on the Fed's agenda ?

Just a few of my thoughts folks.




Bloomberg article fwiw.



Fed, Still Harboring Inflation Concerns, May Wait to Raise Rate

By Scott Lanman and Simon Kennedy

Aug. 28 (Bloomberg) -- Federal Reserve policy makers, who gathered at their annual mountain retreat this weekend, may be more concerned by inflation than some investors assume, though not enough to resume raising interest rates just yet.

Economists who scrutinize the Fed and attended the conference in Jackson Hole, Wyoming, said the central bank is caught between a housing slump that's slowing economic growth and consumer-price increases that are too high for the comfort of some officials. The result may be at least one more decision to leave interest rates unchanged before pushing them higher.

The state of Fed policy permeated conversations at the Kansas City Fed-hosted symposium, even as the official theme was the challenges posed by closer global economic ties. Chairman Ben S. Bernanke and 13 of the 16 other members of the Fed's rate- setting Open Market Committee came to the event; none talked about the current state of the economy or rates for the record.

``There's a very big range of views here,'' said former Fed governor Laurence Meyer, now vice chairman of St. Louis-based researcher Macroeconomic Advisers LLC, who sees additional rate increases as unlikely. The Fed has a ``situation where there's less certainty about what the next move will be. That's the world that we live in for a period of time.''

Mickey Levy, chief economist at Bank of America Corp., who attended the conference along with Meyer, predicts at least one more rate increase. ``The one thing that seemed to be clear is that there seems to be more concern at the Fed about inflation than is reflected in its recent actions,'' added Levy, who is based in New York.

Campaign Suspended

The central bank this month left the benchmark lending rate at 5.25 percent, suspending a string of 17 straight increases over two years and investors are gambling the pause will become permanent. The price of futures linked to the rate on the Chicago Board of Trade imply a 37 percent chance the overnight lending rate between banks will be raised to 5.5 percent by year-end.

On the eve of the Jackson Hole conference, Chicago Fed President Michael Moskow suggested the Fed may tighten credit further, though it's waiting for more economic insight. ``The risk of inflation remaining too high is greater than the risk of growth being too low,'' he said in a Aug. 22 speech.

Speaking to reporters the same day, Atlanta Fed President Jack Guynn said that while policy is ``properly calibrated,'' the Fed is ``absolutely not'' more tolerant of inflation. ``I was disappointed that some commentators read our last meeting's action and the statement that came with it as perhaps saying we were less concerned about long-term inflation,'' Guynn said.

Comfort Zone

How such sentiments reflect the future actions of the FOMC proved a subject of talks outside of the official sessions at Jackson Hole on globalization. The Fed's preferred inflation gauge, which excludes food and energy prices, has run at or above the top of the 1 percent to 2 percent ``comfort'' range stated by Bernanke in 2004, rising in June to its highest since 2002. Consumer prices excluding food and energy rose 2.7 percent in July from a year ago.

``The Fed has made a bet, call it the Bernanke bet, that the economy is going to slow enough to slow inflation,'' said Paul McCulley, managing director at Pacific Investment Management Co. in Newport Beach, California, which runs the world's biggest bond fund and expects the Fed to leave rates on hold until cutting them next year. ``Whether that's a good bet or not is the real topic of the symposium in the corridors.''

Elk Antlers

Inside the wood-paneled Explorers Room of the Jackson Lake Lodge, under chandeliers made from elk antlers, the Fed governors and presidents joined central bankers from about 20 countries and economists from business and academia to debate what the Kansas City Fed termed ``The New Economic Geography.''

That topic allowed Bernanke, in his first Jackson Hole appearance since succeeding Alan Greenspan in February, to avoid mentioning the FOMC's current challenge. Instead he delivered a speech warning that the ``unprecedented'' pace of global economic integration may be constrained by protectionism and terrorism.

Participants also heard from Harvard University professor Kenneth Rogoff that the values of stocks, homes and currencies may become more sensitive to central bank rates because of a decline in global risk, while Gene Grossman and Esteban Rossi- Hansberg of Princeton University reported how outsourcing jobs abroad may actually deliver higher wages at home.

During breaks, meals and hiking and rafting excursions, other topics were fair game.

Focus on Minutes

While the FOMC voted 9-1 on Aug. 8 to leave rates unchanged, Bill Dudley of Goldman Sachs Group Inc. said the minutes of the meeting, to be released tomorrow, would show the decision wasn't easily reached and that other policy makers may have come close to joining Richmond Fed President Jeffrey Lacker in dissenting.

``I'd be surprised if 9-1 reflects the discussion,'' said Dudley, a former Fed economist and chief U.S. economist at Goldman Sachs who is now an advisory director at the investment bank. ``I expect there were others who maybe thought they should do a little more,'' he added during a break in conference sessions.

The economy grew in the second quarter at half the pace of the prior three months and the housing market is slumping with sales of previously owned homes falling in July to the lowest in more than two years. Inflation, meantime, has quickened in recent months as oil prices remain near record levels.

For now, the Fed's rate decisions -- with the next one scheduled for Sept. 20 -- will be driven by new information on financial conditions, economic growth, prices and the housing market, economists said.

``At this stage of the game they don't know what the next move is,'' said Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc. ``It's a much less clear-cut time, and when that happens, there's no reason to show your cards before the game is over.'' Swonk spoke at Jackson Hole.

To contact the reporter on this story: Scott Lanman in Jackson Hole at [email protected] ; Simon Kennedy in Jackson Hole at [email protected] .

Last Updated: August 28, 2006 00:06 EDT