Ellington

Fed Chairman Ben Bernanke signaled an interest rate cut and acknowledged long-term challenges to the state of the economy, but it couldn't keep the Dow from losing another 5 percent, the NASDAQ nearly 6 percent and many bank stocks from taking a huge hit. The markets have experienced their worst five-day point drop ever, with the Dow losing nearly 12 percent of its value.

According to CNN: Federal Reserve Chairman Ben Bernanke predicted that the global financial markets crisis is likely to restrain the economy well into next year and signaled that the Fed may be getting ready to cut interest rates.

Markets did not react particularly positively to the news, despite the fact that economic insiders said it was a louder-than-usual signal from the Fed chair regarding interest rates.

The discussion that ensued, however, suggest that part of the problem might be the inflationary pressures that rate cuts can have -- they weaken the dollar, making imports more expensive. One of those imports is oil, which could begin to cost more at the pump. However, the need to unfreeze credit markets seemed to be more of a driving force and interest rates might help with those markets.

"I'm sure the inflation hawks are worried," said John Silvia, chief economist at Wachovia, referring to economists and Fed policymakers who are generally more worried about inflation pressures. "But I think they'll give Ben enough of a leash."