Fed Alert is Red Alert
There were rumours sweeping the markets all morning of a looming interest rate cut from the US.
And the%3Ca%20href="https://news.bbc.co.uk/1/hi/business/7202645.stm">confirmation of that speculation is intrinsically disturbing: some investors will have made a killing (though they would have had to move fast if they were trading shares, since the FTSE100 has fallen again, having briefly rallied).
To state the bloomin’ obvious, central banks are not supposed to leak.
Here are other reasons to be worried, in spite of the Bernanke bounce in stock markets.
What the Fed has done looks like panic.
It hasn’t cut rates as much as three quarters of a percentage point for as long as I can remember.
And it made the decision to slash a week before its scheduled meeting.
If it looks like panic at%3Ca%20href="https://www.federalreserve.gov/">the Fed, smells like panic at the Fed, and quacks like panic at the Fed, well many will say it is panic at the Fed.
And what if the evasive action doesn’t work?
What if, after the Bernanke bounce, stock markets continue to fall, financial markets remain relatively illiquid, banks remain reluctant to lend and the US economy continues careering towards recession?
Then the players in the global financial souk will begin to fear that the US authorities “hav’nae got the power”, to quote Scotty.
Which, in the battle between the doom-mongers and the optimists over prospects for the global economy, would represent a disturbing victory for the forces of darkness.
UPDATE 15:19 Oh dear, the Bernanke bounce was short-lived in Europe and non-existent on Wall Street.