The Fed has now lost all credibility. After the report cam out today announcing that they were leaving rates unchanged, the dollar fell strongly against the Euro, and Eurodollars rallied. Stocks might have risen but bonds fell. The rest of the world views the fed as a toothless creature . They cannot raise rates to halt inflation as the US economy remains very weak. Hey cannot lower rates because of very real and very strong inflationary pressures.

To make matter worse the report contains a sentence that says "Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending."Interesting. The previous report stated that economic conditions remained weak. When, exactly was this activity continuing to improve from? Not the last fed meeting. Today's headlines indicated that spending remains weak, and real estate was still falling in price. Warren Buffett indicated that consumer activity was getting worse in his opinion. Bill Gross of Pimco said the fed was jawboning and that there was more deleveraging and turmoil to come in the markets.

The report also expressed the feds belief that inflation pressure would abate later this year. Again, this is flies in the face of what is happening in the world. Wheat price rose on concerns of Midwest flooding. General Mills raised cereal prices as grain prices were hurting profit margins.

The fed is out of bullets. Hey lowered rates form over 5% to the current 2%. Nothing improved in the economy. Unemployment continues to rise and real estate continues to fall. None of this bodes well for banks for the next six months. There will continue to be an increase in credit card delinquencies and home equity loans. Charge offs and losses still lie ahead of us no matter what the fed does or does not do. The major banks are still much more of a sell than a buy.