Can Bernanke be the market saviour?

Following are excerpts taken from Bernanke's speech on 10 Jan.

"Recently, however, incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced. In addition, a number of factors, including higher oil prices, lower equity prices, and softening home values, seem likely to weigh on consumer spending as we move into 2008.

A second consequential risk to the growth outlook concerns the performance of the labor market. Should the labor market deteriorate, the risks to consumer spending would rise.

Thus far, inflation expectations appear to have remained reasonably well anchored, and pressures on resource utilization have diminished a bit.

We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks. Financial and economic conditions can change quickly. Consequently, the Committee must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability."


I believe many people including me, are interpreting his speech as proning to a 50 basis point cut. As Mr. Bernanke has highlighted the downside risks to consumer spending, next week's retail sales figure is going to be very crucial.

Should the Fed cut rates by only 25 basis points this time, how would the equity markets react?