One of the Most Anticipated Fed Meetings in a Long Time

Today the Federal Reserve Board met to determine the direction in interest rates. Due to all of the problems in the credit markets written about week after week on this web-site, the bulls were betting on the Federal Reserve Board bailing out the markets.

Although highly unlikely, they were hoping for an interest rate cut. If not, at least there was hope that the Federal Reserve Board to acknowledge that there is a problem and state that they are open to lowering interest rates.

Unfortunately for the bulls, none of that happened. In fact, the Federal Reserve Board is still aggressively fighting inflation.

Jim Cramer has been screaming every night on his stock show that the Federal Reserve Board should bail everyone out. He literally threw a 3 year old fit on television today following the fed announcement.

There is something that the bulls do not acknowledge in the desperate plea for someone to bail out these problems so the party can continue. The fed has every right to be concerned about inflation. However, it is not the type of inflation that they typically worry about during the meetings. They are worried about ASSET inflation getting out of control.

They cannot afford to lower interest rates here. If they do, the real estate markets will ignite again and a good possibility exists that all assets (Stocks, bonds, real estate, etc) would morph into an incredible out of control bubble environment. (See China) Remember bubbles don’t end very well. It would only be putting off the inevitable.

They cannot afford to ignite the speculative spirits of the markets. Thus they are forced to stay on the sidelines and do nothing.

Unfortunately, the economy is weakening and the real estate markets are making it tougher for the Federal Reserve Board to sit on the sidelines. They have to take the lesser of two evils. They are between the ultimate rock and a hard spot. So, they do nothing.

Only a very desperate situation will motivate the Fed to lower rates.