Link Banana

The Economist argues that Mr. Bernanke and the Fed are doing their best to satisfy Wall Street. Sound like a “Greenspan put” to anyone else?

But not all indicators point to disaster. Orders for durable goods and a private payroll report were surprisingly good. That suggests the Fed’s boldness is driven more by policymakers’ second rationale, that of reducing the risk of a negative spiral from financial markets to the economy. Hence the decision to slash rates on January 22nd, in response to a global sell-off. Strikingly, the Fed statement on January 30th mentioned “stress” in financial markets before discussing the economy. In a dovish text, the central bankers left no doubt that they were most worried about the downside risks and would act in a “timely manner” to address them.

Judging by the price of Fed fund futures, investors expect the federal funds rate to be as low as 2.25% by the end of the year. That highlights the danger in Mr Bernanke’s new strategy. In trying to prevent financial-market calamity, the Fed may find itself pushed by Wall Street to leave interest rates too low for too long.