Fed Funds

Notwithstanding the housing markets, LIBOR, and related credit/financing difficulties, how can the Fed raise when:

1. CPI annualized at 4.5 percent
2. Equity prices still up for the year
3. Chinese import price increases
4. Dollar weakness
5. ** ...adding to GDP via increased exports
6. Commodity prices increasing...fast. Oil, gold, etc.

Given:

1. Shift from "core" to "headline" as starting point for inflation expectations
2. Bernanke's awareness of Miller in 79 pegging to the inflation rate and not above it to contain inflationary exectations
3. Needing the housing market to calm things down to acceptable levels
4. The geopolitical situation in the middleast subsiding somewhat...less incentive for oil importing countries (Japan, China), to subsize out security outsourcing services by buying our government debt. (I have no doubt that the recent move by the Saudis was precipitated by Iran's newfound diplomatic cooperativeness...)
5. Possibility of lates employment figures reflecting demographic changes, and unemployment too "low" (from Phillips curve and other "useful rule-sets" that the Fed "considers")

Most economists predict a rate cut...but then again most economists (who respond to polls taken by business publications) work for institutions where that would be a beneficial outcome. Then, if the Fed stands pat, as I think, they will express shock at the Fed "going against expectations". Inflation expectations formed by the consumer are VERY different than the expectations garnered from economists.