There are reasons the market's so confused about this


meeting today.

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The Washington Post's

John Berry -- one of those writers who is understood to play tennis with

Alan Greenspan

-- wrote that the

Federal Open Market Committee

would leave rates unchanged and say that the risks to the economy are balanced. (At the last meeting the FOMC said that the risks were still tilted toward inflation.) This was in keeping with recent speeches from Fed officials, as well as an article that had appeared in

The Wall Street Journal

two weeks earlier.


The Wall Street Journal's

David Wessel, another of those writers believed to be close to the Fed (and whose backhand may or may not be better than Berry's), wrote that the central bank would likely say that the risks to the economy had shifted toward recession -- which would just about guarantee a rate cut in January -- and that there was a decent chance it might even cut rates today.

Monday afternoon,

Market News'

Steven Beckner, the third of the troika of writers the Fed supposedly whispers stuff to, wrote that it was unlikely that the FOMC would shift to an easing bias. Although the article did not appear sourced in this instance, Beckner does know how the Fed thinks, and what he wrote was fairly well thought out. Later in the afternoon,


released its poll of the 26 primary dealer economists on what the likely outcome of the meeting was. Three said the Fed would move to an easing bias, while the remainder said neutral.

The Whisper Mentality

"Wall Street economists move slowly and tend not to put their necks out," says Tony Crescenzi, chief bond market strategist at

Miller Tabak

. "In a sense, there's a whisper number today, with the market thinking the Fed might even cut rates. I think the


article created a whisper-number mentality." Crescenzi suspects that the Fed will move to an easing bias. It is, he says, a natural compromise between those doves on the Fed who will be arguing for an outright ease, and the hawks who will be arguing for nothing beyond a neutral bias.

Stocks rally as Fed decision nears

But because of the


article, the bond market might not meet an easing bias with the glee that it would have a week ago. It may be a minority that is hoping for a rate cut, but it is a visible minority. Their disappointment would be felt in the marketplace.

It would be a similar story in the stock market, says

W.R. Hambrecht

head of listed trading Todd Clark -- a surge higher on a rate cut, a selloff on a mere change in bias. Yet Clark believes that the market's response to either scenario would be short-lived.

"If you have a rate cut, initially you're going to have euphoria," he says. "But the Fed doesn't normally go from a tightening bias straight to cutting rates unless it's seeing something those in the market aren't. People will start to says, Is the economy slowing down too much? So you may have a perverse, negative response."

Conversely, Clark thinks that if the Fed goes to an easing bias, the initial reaction will be to sell, but the market will come back as investors realize that a January cut is all but in the cards. And if the Fed goes only to neutral, although the initial disappointment will be palpable, the market will be able to take succor in the fact that the hoped-for rate cut is, presumably, only a little ways off.