“Markets will be hungry for any good news next Tuesday, and may take the Fed’s words the way a plain girl or guy who hasn’t had a date in months would when his telephone starts ringing.”
Tomorrow is the biggest day in Federal Reserve Chairman Ben Bernanke’s short tenure as head of the US financial system since taking over early last year.
The tone of the market in the short term will be pretty much completely determined by what the policy statement following the Fed’s decision on interest rates does or does not say.
Nobody expects a rate cut tomorrow. But the big question is if Bernanke will make concessions to the turmoil in debt markets.
If he throws investors a bone and makes reference to “problems in the credit markets” or some such thing, we are likely to see a continuation of today’s rally. Markets will read into this the possibility of a near term rate cut if credit markets continue to be frozen.
If, however, he feigns not to notice; if, as it were, he does not ask us how we are and soothe our present insecurities, markets will likely feel rejected and selloff.
The WSJ’s Real Time Economics blog has collected the perspective of a bunch of economists on what Ben will do tomorrow in a post entitled “Fed Calls: Debating Statement’s Bias”.
Does he still love us? I mean we have been acting a little insecure lately and possibly have gone a little soft the last few years. But we’re still cute. Aren’t we?