Wall Street is hoping Federal Reserve boss Ben Bernanke will blink.
Bernanke told Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Treasury Secretary Hank Paulson yesterday that the Fed was prepared to use all available tools to calm the financial markets, heating up speculation that an interest-rate cut could soon be in the offing.
But those hopes were doused by the afternoon, when Richmond Federal Reserve Bank President Jeffrey Lacker stuck with the Central Bank’s traditional hawkish tone, saying the broader economy, not “financial market volatility,” would determine the next interest-rate cut.
After bouncing around most of the day, the Dow Jones industrial average ended the trading session down 30.49, or 0.2 percent, at 13,090.86.
The Standard & Poor’s 500 stock index edged up 1.57, or 0.1 percent, to 1,447.12. The Nasdaq composite index rose 12.71, or 0.51 percent, to 2,521.30.
Still, some on Wall Street are hoping Bernanke might bow to a little pressure.
After a morning meeting with Bernanke and Paulson, Dodd said the Fed chief expressed disappointment with the results of the Fed’s efforts so far to calm the markets, which have been gripped by fears that a growing crisis in the home-lending market could throw the economy into a tailspin.
The Fed has injected billions into the banking system over the past week to grease the lending markets and ease investor fears.
When the market turmoil continued, the Fed on Friday took the added step of cutting the discount rate it charges to banks – the first time since turbulent 2001 it has made such a move between scheduled meetings.
But Wall Street wants a cut to the much more influential federal funds rate, which is charged on overnight loans between banks. It would mark the first cut since 2003.
Dodd, who’s gunning to be a presidential candidate in 2008, said he didn’t ask Bernanke specifically about a rate cut.
“I asked the chairman of the Fed whether or not he was willing to use all the tools available to him, and he said he was prepared to do that,” Dodd said.
Bernanke, a Princeton economist, has been learning to stay mum after his loose lips about the economy got him into trouble when he first took over from long-time Fed chief Alan Greenspan. janet.whitman@nypost.com