Maybe someday soon, prices of food and energy will take a breather – but so could those exchange traded funds (ETFs).
That’s because Federal Reserve Chairman Ben Bernanke says the rate cuts are probably going to stop here. The main reason is rampant inflation, reports Jeannine Aversa for the Associated Press. Bernanke feels that between the economic stimulus package and rate reductions, better economic conditions should be in the offing in the second half of this year.
However, just because the Fed may hold off on more rate cuts, it doesn’t mean the inflation problem is solved. If oil prices remain high, inflation could worsen on its own, and Bernanke pointed out the risk. And then there’s the danger of a self-fulfilling prophecy: if consumers, investors and businesses believe inflation will continue, they will change their behavior in ways that will aggravate the problem.
The Fed’s next meeting is on June 24-25.
There was also a pleasant surprise this morning in the form of new orders at U.S. factories, which rose 1.1% in April. Strong demand for non-durables was enough to offset a dip in durable goods, reports Glenn Somerville for Reuters.
Non-durables include paper products and food items, which jumped 2.8%. Durables, such as cars and refrigerators, fell 0.6%.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.