Rory Robertson Quotations | Page 2

Financial conditions clearly are quite a bit tighter than they were six weeks ago. I'd be dumbfounded if the Fed was not anxious about this dramatic rebound in yields dampening the rebound in the pipeline.

It leaves open the door for the Reserve Bank to raise official interest rates sooner rather than later.

I am skeptical that this time will be different.

The inflation risk is less intense than many would imagine and, as energy prices edge lower, some investors are seeing value at current yields. It helps reduce the pressure the Fed has been worried about.

I'm not sure how markets might react. On one hand, you could see the shorts kicking in, pushing it higher, but on the other hand, you could see investors feeling a bit nervous because the Fed is saying things are worse than they thought.

At this stage, the worst-case scenario for the US economy post-Katrina simply is not playing out.

The thing driving service prices is wage growth, and after two years of sub-par economic growth, we've got wages decelerating. If the Fed doesn't get the economy growing at an above-trend pace in the next couple of years, deflation will arise.

The thing that helped the economy so much was a drop in interest rates, which meant lower mortgage rates, which meant consumers have been able to tap the wealth in their homes by refinancing and taking equity out of their homes. With rates having backed up so sharply, refinancing is not such a bargain any more.

Rising oil prices are quite unhelpful, and falling prices are quite helpful in terms of giving stimulus to the economy. Lower prices feed through pretty well to everyone immediately.

The sharp rise in mortgage rates that is now under way threatens to limit the refinancing boom, limiting the cash that will be dropped into U.S. consumers' hands during the critical holiday-shopping season.