Waiting for Bernanke

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Good morning. Consensus thinking holds that the Fed will leave interest rates unchanged today, which means there is unusually intense anticipation of exactly what the Fed will say in its accompanying statement. Specifically: How will the Fed acknowledge the chaos in the mortgage and credit markets? Will it even mention housing? And will it signal in any way that it is ready to cut rates if those markets further deteriorate?

The comment section here documents some pretty strong objections to cutting rates in order to prop up the mortgage and housing markets. There is also this insight from mortgage investor Michael Farrell: “Even if the Fed eases, it is probably not going to help the housing market,’ Farrell said. ‘This repair cycle is going to take a lot longer because it is not concentrated in the banking system like it was in the 1990s. Back then, they could repair the banking system by dropping interest rates. Now they can’t bail out rich hedge fund guys in Greenwich.’’

Thoughts? Comments? Insights?
Photo Credit: Reuters