Yesterday on CNBC I expressed my strong surprise that the debate about Fed rates cuts today made it seem like it was entirely a matter of 25 vs. 50 basis points, with the latter more or less a certainty. My view, as I said then, was that Bernanke is likely to do 25 points, but the no-cut option is considerably more likely than the market thinks. Why? Because Ben Bernanke loves surprises, and he doesn’t want to be seen as the market’s puppet.
I see the WSJ has come to the same conclusion this morning:
The behavior of financial markets implies near certainty by investors
of a quarter-point cut in the Fed’s key short-term interest rate. But
for policy makers, the decision is between the quarter-point reduction
and no cut at all.