That's right. Fed wants to retain an exceptionally low rate for an extended period of time. And yet the US markets gave a thumbs down to this benign act of Fed. The moment the decision on rate was announced yesterday, the US markets sold off. Dow Jones which had made an intra-day high of 10553 before the announcement, swung into negative territory to make an intra-day low of 10402 after the announcement. By pressing the sell button US markets signaled to Ben Bernanke that he had not done enough.
But what more could Bernanke have done? He went overboard painting a rosy picture and not stepping on any toes, keeping rates at zero for an extended period of time. Time magazine also splashed him across newsstands on the same day as its Person of the Year 2009. Every bit of positioning helps. Time's managing editor showered accolades on Bernanke. Sample this piece from the article - "Bernanke didn't just learn from history; he wrote it himself and was damned if he was going to repeat it,".Such manoeuvres can surely give Bernanke that extra push when Senate Banking Committee votes this Thursday on Bernanke's second four year term.With a little help from my friend - reminds one of an old song by Beatles!
But alas! Markets will be markets!! Ben Bernanke's friendly and conciliatory overtures were given a total cold shoulder. The promptness with which the market sold off after the Fed announcement of keeping rates unchanged suggested that this was a premeditated move of the market. It could well be that irrespective of Fed decision market participants had preplanned to sell off after the announcement. Are they trying to express their displeasure before Bernanke gets the votes for a second term? Time will only tell. I would rather like to pin the sell off down to fears of sovereign default by Greece. More of that later.