The Ben Bernake Dillemma

“most economists use statistics like drunks use lampposts: for support more than for light”
-Churchill


The challenge before Bernake is to make a decision to pause/stop the fed rate hike this FOMC meeting or not. While, in the last meeting the central banker suggested that forward is likely to be a slave of data (statistics). The rising inflation (11 year high) reported substantiates a rate hike. However, the growing unemployment (bad data) and slump in Housing shows that another rate hike can push to recession as equity markets are jittery coupled with geopolitical uncertainty and rising energy prices.

Come what may it is going to be trouble some for the America’s.

What needs to be watched is that whether Bernake uses the statistics as a lamp post for support or light.  While in the past we saw all assets price increasing commodities, real estate and equity – a further rise in Fed rate will shake the equity markets and the real estate. I therefore, do not see a rate hike but the inflation data going forward is going to be worrisome. Get ready for some challenging times ahead……