The Times: Mixed signals are dividing the experts

BEN BERNANKE thinks America’s economy is strong, and that inflation remains a danger. The stock market believes the Federal Reserve Board chairman, so share prices hover at record levels. The bond market doesn’t — it expects that he will soon have to recognise the economy’s underlying weakness by lowering interest rates, not this week when the monetary policy committee meets, but almost certainly by the spring. The currency market is siding with the bond market, its players guessing that the Fed will indeed have to cut interest rates, making the dollar less attractive relative to the euro and sterling.