The Market's Fate Lies in Fed Hands

"The best-laid schemes o' mice an' men gang aft agley"
-- Robert Burns

The Federal Reserve has spent the better part of the past year telling the market of its plans to raise interest rates 25 basis points at every meeting, come hell or high water. Now that Hurricane Katrina inflicted both contingencies upon residents of the U.S. Gulf Coast and upon all who are dependent on their resources and services, the course of monetary policy will be affected with risks running high no matter what the outcome.

Let's start with a conclusion and work our way backward: The Federal Reserve's tightening of credit since April 2004 -- yes, the first rate hike did not come until June 30, 2004, but the course had been established on April 2 with a strong employment report for March -- prevented the doubling of crude oil prices since that time from upending financial markets. ...