Bernanke Walks the Hawk

This column was originally published on RealMoney on Nov. 28 at 1:27 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Fed Chairman Ben Bernanke sounded characteristically hawkish in his speech before the Italian American Foundation moments ago, continuing a strategy begun in earnest in September when Fed Vice Chairman Don Kohn signaled to the markets that its expectation for a near-term interest rate cut was wrongheaded.

Bernanke's speech today was airtight, with the chairman leaving virtually no room for investors to conclude that the Fed is contemplating an interest rate cut. Ostensibly, the Fed's strategy is to lock in gains that it has made on inflation and inflation expectations. The Fed is taking no chances.

Bernanke's comments are consistent with what the markets are already priced for; chiefly, that the Fed will not act on interest rates for six months. Moreover, with the inflation rate falling, the real fed funds rate (the fed funds rate minus inflation) is rising, meaning that Fed policy is getting tighter. ...