FOMC minutes (29 Aug 06)

Yesterday (29 Aug 06), the FOMC released its FOMC minutes. While analyst reports I read thought that the report is rather bearish, the market rally after the release of the report. Below is an extract of one such reports:

From Briefing.com The market took a surprisingly optimistic view of the August 8 FOMC minutes released yesterday. The minutes indicated that many members felt higher rates were needed. The minutes stated that it was a "close call" at that time not to raise rates, and that "additional firming may well be needed." The minutes also said that "All members agreed that the statement to be released after the meeting should convey that inflation risks remained dominant and that consequently keeping policy unchanged at this meeting did not necessarily mark the end of the tightening cycle." That's a fairly hawkish tone that conflicts with the financial market view that no more rate hikes are likely.

Nevertheless, traders poured over the minutes to find what could be considered bullish statements about economic and inflation trends. There was a clear effort to find the good news and ignore the bad. In our opinion, the minutes in themselves were clearly bearish for the stock market.

The fact that stocks went up after the release says more about the underlying tone than about what the minutes themselves revealed. We still believe the market is overly optimistic on the inflation and interest rate outlooks. There is a risk of disappointment on both. Nevertheless, the longer-term fundamentals remain good. -- Dick Green, Briefing.com.

I found Dick Green often give good analysis of the market. I tends to agree with him on this regard (FOMC minutes). I will treat any short term rally with care.

- PersianCat04 (Millionaire-in-progress)