The Markets Raise Bet Bernanke Will Cut

Perhaps saying that the markets still “expect” the Fed to cut rates isn’t putting the right coloration on Fed futures prices, which imply another reduction in December. Comments in the press prior to the last FOMC meeting indicated that a big factor in the Fed’s thinking was that it didn’t want to upset markets. if true, that is tantamount to saying the Fed is afraid to contradict the expectations implicit in Fed fund futures.

So in light of the Fed’s cravenness, the better phrasing might be “the markets demand that Bernanke cut.”

From Bloomberg:

Federal Reserve Chairman Ben S. Bernanke failed to convince investors that there’s no need for further interest-rate cuts soon.

Bernanke told lawmakers in Washington yesterday that officials already expect the economy to “slow noticeably” this quarter, and warned of “upside risks” to inflation. Futures traders focused on his growth comments, increasing the odds of a quarter-point cut in the benchmark rate on Dec. 11 to about 90 percent, from 70 percent a day earlier.

The speculation may complicate Fed decision making, raising the risk of a sell-off in stocks and bonds should officials keep the main rate at 4.5 percent.

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  1. Anonymous

    Early on when Bernanke was tagged with the Helicopter Ben moniker I didn’t think his reputation could sink much lower. Now I see my error, in the form of Cramer’s Bitch. I’m jealous of Australia and Europe, why can’t we have a real central banker in the US?



    MSN Money’s Jim Jubak on the Fed chairman, “Ben Bernanke is a wuss and his Fed, like that of his predecessor, can’t abandon reason fast enough. It surrenders to Wall Street’s demands regardless of consequences.”

    What Wall Street wants from the Fed, it gets…

  3. "Cassandra"

    Yves…everytime I visit NC, Google Adsense pops up loadsa’ “How to Make Money In Real Estate” and other real estate spec ads. You think someone should be told ??…

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