My quick take on today's Fed rate cut: If Ben Bernanke ends up as a one-term Fed chief, this may have been the meeting that decided his fate. Not only did the Fed disappoint Wall Street with a quarter-percentage-point cut—and a particularly disappointingly meager cut in the discount rate— but its policy statement still seemed as worried about inflation as about economic growth. This was the statement from the Halloween Federal Open Market Committee meeting that unnerved the markets:
The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth.
And here is what the group said today:
Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
One other thing: A half-point cut might well have given the market, already up 1,000 points in the past couple of weeks, a further boost. That growth in stock portfolios and 401(k) plans would have helped offset the losses in net worth from the drop in housing prices and perhaps created a different media narrative on the economy as we head into the heart of the election season.
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