I've got a full plate tomorrow, so I may not be able to post in the morning. I am going to try to arrange it to be around the computer at 1:15 (Central), though I may step out to watch CNBC for the actual announcement. So here are my thoughts after a long day of kicking this around, watching the markets, and reading the commentary.
25 b.p. still seems like what we will see. Greg Ip's column didn't push the market very much toward any real expectation that they will do nothing. But it did wring out any hope of getting 50 b.p. If that was the intent, it worked. If it helps the market get a little better perspective going forward (looking ahead to December), then it's a good thing.
Tonight I find myself thinking about tomorrow's GDP numbers and wondering about inflation. I find myself compelled to say that I really hope that the Fed can create an expectation that there will be no cut in December and stick to it. 4.5% may not be exactly neutral, but it's close. Close enough to be a good vantage point to see where we go from here.
I'm sure it is frustrating for Fed officials to have a market that responds to every bit of news as a potential tipping point, but that's the environment we live in right now. They can manage it once they recognize how sensitive everyone is to a hint of economic weakness and how entrenched the sentiment is that the Fed will rescue them. This is Mr. Bernanke's chance to establish his approach to managing market expectations. The statement tomorrow will tell all.
Enough kibitzing. It's their move.
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