Stuck at crossroads...

The Fed reiterated its wait and see approach to rates, emphasizing the fact that although they expect a moderate recovery for the third and fourth quarters, their main concern remains inflation (most recently at 2.1%) clearly above what it considers to be its comfort range of 1-2%. Yesterday's statement was in part geared towards providing greater clarity to the confusion over earlier remarks in which they dropped any mention of a tightening bias which the markets misinterpreted as meaning that inflation was no longer a central issue. Economic indicators are increasingly suggesting that the U.S. expansion is slowing down as the housing debacle, rising unemployment and higher fuel prices take their toll on consumption. The Fed is clearly betting on this slump to bring down the inflation rate which explains why they are unlikely to intervene anytime soon.