While the formal outcome of today's FOMC meeting is more or less a foregone conclusion (Fed will leave rates unchanged), the short-term direction of the stock- and bond markets will be decided by the wording of the accompaning statement. The Fed is an institution so powerful that a single word in a statement could destroy or create hundreds of billions of dollars in financial wealth. The key is whether or not they will open for rate cuts in the near future. If they do, stocks and bonds will rally. If they don't and instead continue to emphasize inflation as a greater threat than weak growth there will be a sell-off in the bond market and probably even more in the stock market.
Most statements from Fed officials indicate they will basically leave statements, but it cannot be ruled out that the increased anxiety over the subprime mess and the risk of a recession have caused them to change their minds.
Someone who's mental health will be in great jeopardy if they leave the statement unchanged is Jim Cramer, host of CNBC show "Hard Money". His buddies at some of the subprime banks are losing money and that is making him very upset and makes him lose anything resembling objectivity and rationality. The female host looks rather shocked and embarrased by his performance. Watch it for yourself here:
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