As you more than likely already heard, Big Ben Bernanke was speaking today in Jackson Hole, Wyoming.  What is amazing is how investors and analysts really wanted to get him to say if the Fed Funds Rate was going to get cut on Sept. 18th.  Yeah, like that was going to happen.  I will get into the reasoning why later.

Big Ben did say something that is a hint of what will likely happen, and that is that downside risks have risen "appreciably" and that losses attributed to the credit markets have "far exceeded even the most pessimistic projections."  Remember that we warned that the problems probably went deeper than is being let one.

Another interesting point is that the Fed's favorite gauge of inflation, Core Personal Consumption Expenditures (PCE) was released this morning and the year over year rate was 1.9%, within the Fed's target range of 1 - 2%.  That clears the way for added "comfort" in cutting the Fed Funds Rate.  While PCE is the favorite gauge, it is not the only one that gets looked at and next week's Jobs Report will be a big one as well.

Well, that leads me back to why Big Ben will not state what the Fed will do three weeks from now.  If he says there will be a rate cut now, markets will react and be happy for now.  But what if he says that and then data comes out showing the need to leave rates the same?  What if they indicate a need to raise rates?  Granted the likelihood of even keeping the rates the same is low right now, but the markets would react very violently if the cut ended up being different than what he said it would be today.  It would behoove you to remember that when you think you will get an answer from Bernanke this far out.

He did mention another important point.  He stated the Fed was ready to take additional actions as necessary to boost liquidity and will act as needed to to limit the adverse effects on the broader economy.  This statement is as close to a hint as you will get about what the Fed will do.  Does it guarantee a rate cut?  Absolutely not.  But it does present an open door to do so "if needed".

Sources: MMG's economic calendar, Wall Street Journal Online and MarketWatch articles.