Tuesday, September 16, 2008
Well, it seems as though Fed Chief Ben Bernanke has "grown a pair" over the last six months, today's FOMC meeting having come and gone with nary a hint of coddling for financial markets - that is, financial markets that many feel are in the middle of a global meltdown and in dire need of rescuing.
The last two policy statements, shown side-by-side below, acknowledge the recent developments (e.g., the nationalization of $5 trillion in mortgage debt, the demise of Lehman, Merrill, and, soon, AIG) but fail to provide any shift toward easing, let alone a half-point rate cut as some were expecting.
The characterization of the financial market conditions changed from "under considerable stress" in August to the strains having "increased significantly".
Almost as if, nothing's really changed.
This was a bold move - one that hopefully won't backfire.
Recall that "tough love" was also offered up about a year ago last summer, only to be withdrawn in favor of coddling a short time later.
If short-term rates weren't already at the freakishly low level of two percent, one might say that, "This is central banking the way it's supposed to be done."