[Fredslist] Bernanke Meeting Yesterday

[Dichter, Dan [PVTC]]

Continuity was the unofficial theme of Ben Bernanke's first policy
testimony yesterday.  The new Fed Chairman reaffirmed long-standing
commitments of monetary policy and in the immediate setting echoed the
tilt of the January FOMC toward further tightening.  Markets have gone
most of the way toward discounting a 5% funds rate soon.  In our updated
and revised forecast we are on board with that, anticipating hikes in
both March and May.

The projections of Committee members and non-voters appear broadly
consistent with market pricing.  Central tendency estimates for GDP
("about 3.5%"), core PCE prices ("about 2%) and unemployment (4.75-5%)
are not out of line with private forecasts, but notionally at least they
would imply a funds rate in a 5% to 5.25% range using standard
formulations of the Taylor rule.  Based on past relationships, those
rates would mark a mild overshoot. 

However, we should stress that whatever the policy rate, if financial
conditions do not transmit recent and pending changes in the funds rate,
the risks will remain toward still higher short rates and still greater
curve inversion.

As always, plesae don't hesitate to contact our office with any
questions or needs.

_______________________________________
Daniel G. Dichter
Second Vice President - Wealth Management
Smith Barney | Citigroup Global Markets, Inc.
31 West 52nd Street, 23rd Floor
New York, NY 10019
p. (212) 603-6178
f.  (212) 307-3863
dan.dichter at smithbarney.com



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