Thirsty Rock

Last week The Fed briefly rattled stock markets with an unexpected inter-meeting rate cut. A full 75 basis point adjustment. Rumors suggest that a precipitous drop in global stock markets forced the Fed's hand. It has come to pass that the actions of one Jerome Kerviel, a rogue trader in Paris who committed the bank Societe Generale to a 50 billion Euro position, may have unnerved the Fed. In an effort to unwind Jerome's trades Societe Generale triggered widespread investor flight from the markets. By reducing the rate, a mere week before the scheduled Federal Open Market Committee meeting, did the Fed react to events at Societe Generale ? The Financial Times wrote "The question being asked now by some in the markets is: was the Fed duped into a clumsy and panicked move by the clean up operation for Jerome Kerviel's mammoth losses from the French bank?". If that is the case and with what we know now, this is surely to embarrass Ben Bernanke. In any case, the