Poole Reconfirms Tomorrow What Market Refuses To Believe

William Poole, the official unofficial spokesman for the FOMC speaks tomorrow at Middle Tenessee State University on U.S. Data Dependency. I am not sure what that means but I am sure that his talk or post-talk q&a will reiterate what the Fed has been saying since Bernanke's testimony in July -- neutral is neutral is neutral until it isn't and the data hasn't convinced the Fed otherwise.

Ever since the Fed met on September 20, the market has taken weaker activity around Philadelphia, softness in housing, and falling oil prices to mean that the Fed has a 15% shot of easing in December and almost certainty that the Fed eases sometime between now and May.

Poole tomorrow lets everyone know that the adults are back in charge. I can not see what data have been released to shift him from the view that rates are high enough to slow but not kill the economy, slow housing down to the pace where it should be given the level of income and employment growth, and therefore slowly ease inflation back down. He and the heads of the Dallas and Richmond Feds seem not to be as concerned with the slowdown as the market and they aren't the only ones.

Earlier this week, the real adults, Volcker and some of the other previous heads of the NY Fed had a discussion at the Women's Economic Round Table in New York.

Here, lifted from the Bloomberg article written by reporter Craig Torres, are some comments to focus on:

``I am a little bit more worried about inflation,'' said Volcker, 79, speaking at a discussion sponsored by the Women's Economic Round Table in New York yesterday. Gerald Corrigan, who served as New York Fed president from 1985 to 1993, said he shared Volcker's concerns.

While the inflation rate isn't ``high'' or ``running away,'' Volcker said, ``it is kind of creeping up, and I am impressed by the degree of pressure, if that is the right word -- psychological pressure, political pressure -- there is not to do anything about it.''

That is the what Poole and Bernanke and their compadres are concerned about -- the 3 year mountain of liquidity that Greenspan left them. They are not worried about housing and, as per Poole's comments on Bloomberg earlier this month, the drop in oil prices and bond yields are a stabilizer for the economy.

We shall see what he says just before the ISM number (Chicago is reported tomorrow, national on Monday) and employment in a week. He won't say they are ready to ease, only that aren't going to be tightening. That should be enough to disappoint.