Trade Team Updates

The ECB's were on the warpath today with Trichet leading the charge, making some intensely hawkish comments on inflation and ECB actions to combat inflation/price stability, it's important we read and digest this stuff as the interest rate decision and following press conference is just a few days away...

ECB's Trichet Sees danger of 2nd round effects, inflation risks clearly on the upside - Effects Of Financial Market Crisis On Real Econ Remains open 1/7/2008 7:30:30 AM

ECB's Kranjec: Discussion of rate hike at last meeting was no empty threat
- ECB is serious about acting as needed.
- Says so far he has not seen much economic impact from market turmoil, but sees some deceleration.
- Notes in some Euro zone countries wage demands could lead to second-round inflation, noting latest inflation figures are not very favorable.
- ECB expectation for protracted hump in inflation is still valid, yet hopes that growth will remain around potential, which depends on the US. 1/7/2008 12:30:44 PM

ECB's Wellink expect 2008 GDP near potential, sees inflation easing later than desired - Says it is important to avod second round effects of inflation
- Says US employment data pointing to US economic slowdown 1/7/2008 8:46:56 AM

And from the Fed today:

Fed's Lockhart: Negatives in economy may be gaining momentum, sees modest growth in 1H 08, improving in 2H - Inflation troubling, but pressure will ease, says fall-off since Sept alone not enoung to remedy market.
- y/y employment growth has slowly considerably over the last 20 months.
- Says financial firms must disclose losses and consumer spending is weakening, but has not plunged.
- Inflation to moderate in 2008, but high oil price may mean outlook too optimistic.
- Says continued USD depreciation a risk.
- Syas the coming weeks could be telling for the markets; Fed myust be ready to "respond pragmatically" 1/7/2008 12:40:14 PM

Fed's Lockhart: Fed now balancing concerns about inflation with "serious" concerns about growth
- Q&A
- Fed has been attentive in making appropriate policy responses to economic situation.
- Says has done credible job tackling risks.
- Says Fed's role is to watch broad economy and does not respond solely to financial market events, says forecasts see drop in oil prices below $100, and should stabilize at lower levels, falling to $80-90 range.
- May have been slowness in seeing economic signs . 1/7/2008 1:06:00 PM

Fed's Lockhart: Keeping an open mind on what the next policy action should be; should not overreact to the Dec jobs number
- Q&A with reporters
- Will not exclude possibility of more rate cuts.
- Will not speculate on whether the Term Auction Facility (TAF) will be made permanent. 1/7/2008 1:34:24 PM

So we have a hawkish ECB and a rather dovish Fed today... Another "interesting" quote came from our buddy Henry Paulson who claimed core-inflation is being contained... yeah OK. Paulson needs to get his head checked.

Just some food for thought as we continue to slip-slide into uncertain and confusing times in the markets...