Market rally

The market is getting a boost here on a story from somewhere that the Fed is going to announce that they will stop paying interest on reserves where they are currently paying .25%. This would be the Fed’s attempt to force banks to lend money instead of parking it at the Fed. In my opinion, this is the last bullet in the gun of the Fed and therefore is not going to be used so soon. An ISM going from 59 to 56.2 or the ISM services going from 55.4 to 53.8 for example is not going to move the Fed into such a dramatic phase of their policy. While I have no doubt that Bernanke will eventually go down this path, I think there is no way it happens for a while as the data is going to have to be really bad for them to spend their last shot in terms of shock, awe and impact.

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