Has Alanís cautiousness set us up for another black autumn? Baumohl doubts it. "The markets had factored in a no-hike with a neutral bias, so this was a sell-off on the surprise," he says. "But when they realize that no hike is still no hike, theyíll get over it." Theyíll have time ó Baumohl expects the Fed to stand pat on the bias all the way until spring, thus making sure thereís plenty of money lying around in the credit markets for any Y2K foofaraw. Of course, unjustified fretting is always a possibility.
After months of fussing and fretting that the Fed would raise interest rates, the markets finally let their guard down ó and got a nasty shock. No, Alan Greenspan didnít hike 'em a third straight time. But he let everybody know heís watching, moving the Fedís bias toward tightening and sending a recently resurgent Dow into an instant 100-point mini-tailspin (thus smothering an earlier rally and ending the day even). "Itís a clear signal that the bank is concerned that the economy isnít slowing down fast enough," says TIME senior economics correspondent Bernard Baumohl. "Consumer spending hasnít slowed enough. The world economy continues to pick up. Thereís no significant inflation yet, but it apparently bears watching."