Tuesday's Fed rate cut and explosion upward in both the Dow and S&P has been dissected already more than it really need to be. It all goes back to what Bernanke has been saying all long. Inflation was worry number one, when that was contained, the rest follows.
The inflation gauge, the consumer price index came out (CPI) and it fell for the second straight month after being essentially flat for the summer. Conclusion? Inflation, at least for now at 2% is in a comfortable zone for the Fed. since that has been accomplished, despite skyrocketing oil prices, Bernanke and Co. turned their attention to economic growth.
Now, has this information been release yesterday, the 1/2 point cut would have made much more sense and perhaps we could have avoided to 7,000 posts on it (here included). It did make for good reading though.
It is becoming more apparent with every move Bernanke does or does not make that he is going to lead the Fed is a relatively transparent manner. If growth slows and inflation remains high,rates do not move, if it growth slows and inflation falls, rate cut time. Simple. I think part of the problem is that people are still trying to view Bernanke through Greenspan's Vaseline covered glasses that obscured everything people thought they understood in his proclamations. A more transparent Fed is a better this for us all, if for no other reason it will not be the dominant news story consistently. A relatively predictable Fed is far more desirable that one that keeps people guessing all the time. Greenspan enjoyed the mystery of the game, Bernanke seems to have no use for it. Good.
Bernanke really is making this simple for us, as soon as we just sit back and listen and stop trying to interpret.