Cannon Trading Futures Blog: Daily Support and Resistance Levels

       =DJ Fed Raises Rates; Paves Way For Possible Pause(DJ)

  By Brian Blackstone
  Of DOW JONES NEWSWIRES
  WASHINGTON (Dow Jones)--The Federal Reserve on Wednesday raised
interest rates a 16th-straight time yet paved the way somewhat for
a possible pause by tweaking key language in its accompanying policy
statement and referring to the lagged effect of previous rate hikes.

  Faced with growing doubts on Wall Street about Fed Chairman Ben
Bernanke's commitment to stable prices amid signs of rising
underlying inflation, policymakers also signaled they won't
hesitate to raise rates further if needed to quell inflationary
pressures.
  The Federal Open Market Committee voted unanimously to raise the
Fed funds rate by 25 basis points to 5%, its highest level since
April 2001 and a move that was expected by all 21 primary dealer
economists surveyed by Dow Jones Newswires and CNBC.
  The Fed raised the largely symbolic discount rate 25 basis points
to 6%.
  Officials backed further away from what markets had taken as a
precommitment to raising rates. Instead, the FOMC suggested that
incoming economic data will play a large role in determining
future moves.
  "Some further policy firming may yet be needed to address
inflation risks," the FOMC said. The previous statement hadn't
included the word "yet."
  The Fed emphasized "that the extent and timing of any such firming
will depend importantly on the evolution of the economic outlook."
  The Fed also, for the fist time since the tightening process
began, made explicit reference to a slower housing market and the
lagged effect of previous rate hikes.
  Language on the rate outlook has evolved steadily in recent
months. During much of the tightening campaign that began in
mid-2004 with rates at a five-decade low of 1%, the FOMC referred
to removing policy "accommodation" at a "measured" pace.
  Late last year, when rates approached a more economically neutral
level, officials said further firming was "likely" to be needed,
and by March the FOMC changed the modifier to "may be" needed.
  Despite those variations, Wall Street still took each turn of
phrase to mean a quarter-point rate increase at each FOMC meeting.

  Yet policymakers have recently seemed uncomfortable with that
interpretation. According to the minutes of the March 28 FOMC
meeting, some members "expressed concern" about retaining the
phrase on policy firming.
  And Bernanke hinted at a change in the statement by telling
Congress last month that "at some point in the future" the Fed may
take no action, though that "does not preclude actions at subsequent
meetings."
  Wednesday's FOMC meeting was Bernanke's second since becoming Fed
chairman in February.
  Recent economic data, meanwhile, have been mixed on the need for
more rate increases.
  Growth appears to be slowing from its red-hot rate of close to 5%
in the first quarter. Payrolls grew at a weaker-than-expected rate
in April, while the housing market has cooled.
  But wages have accelerated with unemployment at nearly five-year
lows and core inflation, as measured by the personal consumption
expenditures index (the Fed's preferred gauge), has risen to the
upper end of the central bank's 1%-2% comfort zone.
  "Possible increases in resource utilization" along with higher
energy and commodity prices "have the potential to add to
inflation pressures," the Fed said.
  In its statement, the FOMC stressed the future moves will be
largely dependent on incoming data, a theme expressed regularly by
Fed officials in recent weeks.
  The committee repeated language from its previous statements that
it "will respond to changes in economic prospects as needed" to
keep growth and inflation risks in balance.
  In the Dow Jones Newswires-CNBC poll taken prior to Wednesday's
FOMC meeting, Fed watchers were split on whether the central bank
will hold rates at 5% in June or nudge them up another quarter
point to 5.25%.

Sincerely, Ilan Levy-Mayer, M.B.A Vice President Cannon Trading Co Inc. http://www.cannontrading.com http://www.E-Futures.com ilan@cannoncapital.com Yahoo IM ilanlevy1970 310-859-9572 800-454-9572 Fax 310-859-0547 9301 Wilshire Blvd. Suite #614 Beverly Hills, Ca 90210 The finest compliment I can receive is a referral from a trusted client. * Important Please Note: Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.