The FOMC is set to meet very shortly and Ben Bernake, the chairman of the Fed, is expected to reduce the Fed Funds Rate 3/4 of a point. Some bets are now on a full 1 percentage point drop. The infusion of cash to the banking system this week was seen by Wall Street as a good sign and stocks rallied for a day. However if the news continues to, regarding the financial markets, be dire, some analysts conclude that Mr. Bernake must reduce the Fed rate by at least that 3/4 mark. With the upcoming election and a continuing sag in the credit markets some now are hinting that Bernake has a 59% chance of keeping his job. This is the worst thing that could happen. The minute the Fed is politicized we are all in deep trouble. For years Greenspan was free from populist pressure and Mr. Bernake should be free from that as well--Republican or Democratic. Monetary policy should never be governed by the 'flavor of the day' sentiment of a politician. If you are old enough you will remember the failed price controls of the 70's under Richard Nixon. Let's all hope that Mr. Bernake and the Fed governors next rate reduction is enough to provide some stability in the credit markets.
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