I've been predicting nothing so this will be a great day for all the Phil bashers if he does. My logic is that, although clearly insane, the Fed Chairman is not so irrational that he will engage in any form of additional Quantitative Easing while stocks and commodities are near all-time highs.
The FOMC will announce their decision at 12:30 and lack of QE language there (which would be a huge change from last to add it) may, by itself, cause the market to drop until 2:15 just after we get the Fed's GDP outlook and then Uncle Ben's press conference, when it's almost a sure thing that he will leave the door open for more QE but, without specific discussions of targets, time-frames and triggers – I'm not sure the same old song and dance is going to do it for markets – who have already had such a huge run-up in anticipation of this event.
Now the S&P is up 10% from June and jobs and housing are somewhat improving – do we really feel the Fed now feels the NEED to support S&P 1,430 and, are things so dire that the Fed will now act to ease for the 3rd time in 12 months? They didn't do that 600 points ago and they didn't do that 300 points ago but, if you listen to the MSM – now they HAVE to. Really?
The SNB's benchmark interest rate is already zero so, unless they are going to pay us to borrow money (and, if they are, I'll take $30Bn please), there's nowhere to go from there. The Swiss make Bernanke look like a tightwad at 0.25%. What the SNB is illustrating, however, is what a joke money is. It's nothing, it's meaningless and even more so when a small country like Switzerland (GDP $635Bn) tells you they have "unlimited" firepower to fight the $4Tn PER DAY Forex markets.
This morning, we got a couple of signs that all this easy money sloshing around is already pushing inflation to uncomfortable levels. First of all, NYC's Apartment Vacancy Rate has hit a 3-year high as renters are being driven out of the market by rising prices. Then we got the PPI report, which jumped a stunning 1.7% from 0.3% in July. Ex food and energy, the core PPI is "only" rising 0.2% per month (still faster than wages) but somewhere between 0.2% and 1.7% per month is reality and you can ask the 382,000 people who lost their jobs last week which one they feel is closer….
Given this data, tomorrow's CPI Report is likely to be about 0.6% – a 7.2% annualized rate of inflation. Is this the environment for more QE? We'll find out this afternoon.