Fed decision tomorrow … and all eyes on Ben Bernanke … known as Helicopter Ben
We waited for January and hoped for 50 bps … fantasized of 75 bps … got them already (thanks to SocGen) and … ???
YES … market has priced in quite fully a further 50 bps rate cut … OMG
The last cut had not all members supporting it, but the market wants more? This is a tricky one!
As market is fragile, Fed might not want to dissappoint the market, BUT … tomorrow we have Q4 GDP and on Friday we face payroll Friday …
Usually, I would bet on 25 bps only, but as Ben is known to be quick with his helicopter and maybe as an insurance for weak payrolls, 50 bps seems to have a chance.
Bad thing … it won’t help much now, but inflation threat later becomes even bigger
Here the headline, I would really LOVE, but won’t see tomorrow … “Fed says, subprime problem under control, banks have sufficient liquidity, therefore we hike rates by 200 bps to fight off inflation”
A DREAM, which unfortunately is far off reality …