With a week filled with economic data releases and market volatility, the Fed will be scrutinized even more to see if it will do the right thing…

Just when you thought the disruptive volatility and general losses in Stocks was about to abate last week, along came Friday’s activity which sent the major Indexes down hard again.  The hope to stability last week entailed the surprise massive rate cut by the Fed and the rush to fiscal action (albeit a trickle in the ocean) by the US government.  After the fact however, more and more analysts and economists are questioning the Fed policy as being perhaps de-stabilizing to economic forces and simply a reaction to shore up Stock trading.  In fact, the scrutiny of the Fed has grown significantly as some are more and more referring to it as the quasi independent entity that regulates economic activity.

Well, if the last couple of weeks wasn’t difficult enough, this week will probably be even a more stringent test for the Fed to “do the right thing” in the face of a sputtering US economy and increasingly turbulent financial markets.  More traditional economists and mainstream market capitalists are probably not happy with the surprise 75 basis point cut last week, citing that market forces should be left alone to set prices.  Where proponents of the cut are bullish speculators and leaders of private industry who have a sizable vested stake in the Stock market and are more short term in nature.

So what is the right thing to do in order for the Fed to maintain both domestic and international credibility?  Well, an aggressive surprise cut has been the source of criticism; additional aggressive cutting in the face of more conservative stances by international counterparts could just turn up the critical heat from around the globe even more.