by Calculated Risk on 10/24/2006 09:20:00 PM

Dr. Duy returns with another Fed Watch: Reappearing After a Long Absence

"... the outcome of this meeting is something of a foregone conclusion, with the Fed comfortable to sit on the sidelines for the time being. Incoming data still point to a slowdown in overall economic activity, but inflation remains well above any reasonable comfort level. As a group, the Fed still bets that the combination of slowing activity and moderating energy costs will be enough to bring core inflation down, albeit gradually.

I find myself pulled in the same direction as William Polley and David Altig regarding the odds of a soft landing – it appears that the housing and auto slowdowns are mostly sector specific event at this point."

Oh my! Tim's pieces are always worth reading, but I'm not as sanguine as my fellow bloggers.

The next few quarters should tell the tale. Will the negative impact of housing related job losses, falling home prices, less equity extraction, and rising defaults and foreclosures, spillover into the general economy? Or will the consensus be correct: a soft landing with 3%+ GDP growth in 2007?