January Import prices soar 13.7%

Inflation, that aint inflation thats just a price adjustment. Yes, we are getting a taste of the value of the dollar. For the past few years the US public has enjoyed our imports from China, the inexpensive and an unexhaustable supply of cheap stuff that we can charge to our credit cards.

Well the flood of US dollars to cover this market has led us to our first rounds of "Price Adjustments." Economists normally call this inflation, and for the most part the backpeddling of the Fed announcing that it could be a little worse that we thought, is probably one of the biggest understatements of the Year.

Looking at Import prices alone, we can see that the January surge of 13.7% is the largest one time price increase since the government started keeping track in 1972.

Lending rates.


US Treasuries are steady this morning, with the 10-yr hovering in the high 3.70's. There is no scheduled economic news, aside from stock markets in Europe and Asia falling overnight. Mortgages, on the other hand, are slightly worse in price after a week of volatility. Prices were helped yesterday by a weak Philly Fed Index result, but lagged Treasury rates. Investor appetite for risk, which includes mortgages, remains low.
Fed funds futures on the Chicago Board of Trade indicate a 94 percent chance policy makers will reduce the target rate for overnight lending between banks to 2.5 percent at its March 18 meeting, compared with odds of 66 percent a week ago. The chance of rates being cut to 2.25 percent are 6 percent, down from 34 percent last week.
Fed policy makers indicated borrowing costs need to be kept low ``for a time". Some foresaw raising interest rates, possibly at a ``rapid'' pace, once the economy recovers. The central bank cut borrowing costs by 125 basis points to 3 percent last month, the fastest easing in almost two decades.

SP 500 going to have a little trouble with Bond insurers

Looking for the Bond insurers to lead the DJIA lower today. S&P will be feeling it also.