So much for the Bernanke put. The Federal Open Market Committee did what everyone expected, and cut the Fed Funds rate by 0.25 percentage points to 4.25 per cent.

But the market reacted with crushing disappointment. The S&P financials index dropped 4 per cent in instant reaction, and bond yields plummeted. Most importantly, the money market suggested that the Libor rate, at which banks lend to each other and which usually closely tracks Fed Funds, would rise significantly this morning.