Ben blows it

Well, it was like waking up on Christmas day and finding all the presents you’d asked for downstairs. Nice but … well .. quite dull.

So Ben Bernanke and his crew at the Fed decided to raise rates by 25 points, not nice for borrowers, but no real surprise.

We expect that the market will blow a raspberry at this ‘expected’ increase and treat it with the respect it deserves -  ie ignore it. However, the real missed opportunity is that this could have been a great chance to nip everything in the bud. As it stands, we will now expect another painfully slow increase next month, and hence more prolonged uncertainty – and then another increase sometime in the next three months.

Had Bernanke increased it by 50 points then it would have sent a strong message to the market – and reduced the likelihood of further increases in the future – the markets would have tumbled a bit, but then quickly returned on trajectory, now we’ve got six months of… well… who knows. Surely Bernanke should have learnt from Greenspan’s failure to respond to the dot com bubble six years ago and reacted sooner rather than later as the Fed always seems to.

Bernanke still has to prove his spurs in our view – we give him 6/10 this time around.