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Predictable. That's what the

Greenspan Fed

has become, to judge by market

reaction to its action today and by the accuracy of market commentary prior to that action. It remains to be seen if predictability is a good thing in a central bank.

Bottom line: This Fed remains unconvinced that it needs to put aside its characteristic gradualism and adopt a more activist policy of restraint. It apparently perceives that aggressiveness on its part may cause a market collapse that will validate, in retrospect, the creeping fear that U.S. equities are a bubble at risk of popping. It continues to prefer to use a wet blanket rather than an ice pick in dealing with the bubble, if indeed that's what it is.

The risk is that wet-blanket gradualism won't prevent further inflation of the bubble because the market has grown complacent in its judgment that this Fed is predictable in its aversion to dramatic and unexpected policy tactics.

With 25-basis-point hikes to both the fed funds and discount rates, the Fed validated the consensus expectation, splitting the baby between those Old Economy adherents who feel a more decisive tightening is necessary and the New Economy enthusiasts who wonder why tightening is at issue at all. Greenspan, like a presidential candidate, seems to be aiming to please most of the people most of the time.

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press-release language is skewed, or biased, in the direction of concern about whether current policies will deflect "increases in demand

that will continue to exceed the growth in potential supply, even after taking account of the pronounced rise in productivity growth." Further, "the Committee believes the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future."

The key question going forward has to be whether a policy of gradualism will work to "get ahead of the curve" and slowly deflate the imbalances that now underlie the Fed's concerns about inflation risks. If not, our markets are destined ultimately to be hit with several doses of monetary policy desperation as a Fed that finds itself both behind the curve and predictable has to play catch-up to reestablish its credibility and its fear factor in the minds of market participants.

Jim Griffin is the chief strategist at Hartford, Conn.-based Aeltus Investment Management, which manages institutional investment accounts and acts as adviser to the Aetna Mutual Funds. His commentary on the financial markets is based upon information thought to be reliable and is not meant as investment advice. While Griffin cannot provide investment advice or recommendations, he invites you to comment on his column at