Bernanke Fed Lowers Rates; Indifferent to Inflation

“I want to know who fills up their gas tank.” – Rick Santelli, CNBC’s Bond Market Commentator

Bernanke and the majority of the FOMC must have thought that with the Moon in dreamy Pisces today, it was time to close their eyes to the real world and journey out of body to an another world.

Most market watchers expected the Fed to lower another 25 basis points to 2% and as usual, they accommodated. But along with the rate reduction was a growing expectation by many market watchers that inflation must be addressed to stop the dollar from falling further, and prevent food and fuel prices from escalating further out of control.

The only semi-sensible people on the Committee are Richard Fisher and Charles Plosser who wanted rates to remain unchanged. To a man lacking earth in his horoscope like Bernanke, the prominent energies of Saturn in Virgo this week is interpreted that the Fed must be cautious and fearful about a lack of growth. Bernanke refuses to relinquish being Jupiter’s poster child for growth and expansion, despite the fact that the only thing the Fed is growing is a bigger bubble in commodities and oil, further harming consumers. Today’s FOMC statement continues to reiterate that “The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices.” (I guess we're supposed to make this our mantra each time we visit the grocery store, gas station, etc.) The Committee’s only concession to inflation is “energy and other commodity prices have increased.” However, it is an insult to the American people who are struggling under these inflationary pressures, to preface that statement with “Although readings on core inflation have improved somewhat,” The FOMC should be condemned to live their lives in “core” (without food and fuel).

Which brings me to the Treasury’s idea that the Federal Reserve should be given more powers than it currently has. Today’s Financial Times quotes David Nason, assistant secretary for financial institutions, who said the Fed “could even use its authority to order banks, hedge funds and other entities to curtail strategies that put financial stability at risk.” Fine, but first the Fed would have to be trained to properly perform their current job before their duties are expanded. As I have previously written, a far better idea is to replace Bernanke with former Chairman Paul Volcker, or someone who thinks like him. I bet Bernanke is sitting in his office looking perplexed at the red numbers on his Bloomberg or Reuters terminal. Hopefully it doesn’t prompt him to have a panic attack emergency rate cut. I am more confident than ever that my prediction of the Fed’s future will come to pass.

Related Posts: “Enough With the Interest Rate Cuts”, “Factors Fueling Oil Prices”

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