FOMC Minutes Show Rate Cut Was 'Close Call'

The market has been brutal in its inability to hold onto any sort of gains that come early in the day.

The financials really took this market down, as the XLF fell and rumors surfaced that Countrywide (CFC) might file for bankruptcy. I don't buy it, but you can pretty much rumor any financials stock lower these days with minimal effort.

Also, the FOMC minutes were released and showed that the last rate cut was a 'close call':

• "Most members saw substantial downside risks to the economic outlook and judged that a rate reduction at this meeting would provide valuable additional insurance against an unexpectedly severe weakening in economic activity,'' according to the minutes.

The Fed lowered it's '08 growth forecast to as low as 1.8% vs. the prior 2.5% - 2.75% in June, and also lowered its inflation forecast to 1.7% to 1.9% from 1.75% - 2% as FOMC members believe the decline in inflation since June is "real".

The odds are pretty high (currently 84%) that the Fed cuts again in December, even as they jawbone the market that they don't want to cut. The bond market is signaling that they are behind the curve, and I expect they will comply, even as they probably don't want to considering the dollar.