It looks like Ben Bernanke just had his 'concern over inflation' bullshit treated with the apparent respect it deserves by the markets. Oil is surging to new records, the USD is falling against the Euro (and Real, and NZD, etc.) again, and Bernanke has just lost the final shred of credibility he was saving in his pocket for a rainy day. 'Inflation Fighting Mandate' my ass. If you're going to play poker with the big boys, make sure you have either the right face for it, or a damn good hand. Thanks Ben! See you @ the corner of Stagflation Avenue and Consumer Rape Boulevard.
He doesn't get it, once you have let the inflation genie out of the bottle it won't go back in with a bit of jawboning from an academic buffoon, it won't even go back in if he raises by the 325BP he cut. It feeds on itself. It will only go back in if the Fed jacks up interest rates until it causes such a bad recession that you get DEflation. All this just to save a handful of bankrupt New York banks that havn't been saved, their shareprices are signalling that not everyone watches CNBC. Look at them, all at or belowQ1 lows, so we now have runaway inflation for nothing. No one understands why they have to be screwed to save these banks. The balance sheet counterparty/system stability issues could have been solved by nationalisation, with the US Govt as the counterparty to the trades and the banks closed down and their equity written down to zero, just as the US dominated IMF suggests for the rest of the world when it has similar issues.
I think the idea is to buy time and inflate themselves out of trouble in that inflation will reduce real debt and support nominal property prices so prices will rise and write back nominal losses and debt will be less, cutting rates also weakesn the dollar and boosts exports at the expense of other counties.