Markets are apparently getting excited about the prospect of more intervention from the Fed. They would do well to temper those expectations, given that the most critical hard economic data -- unemployment and inflation -- point toward a Fed doing less, not more. CPI was up .5% in July, with even the core up .2%, and up 1.8% over the past 12 months, means that the Fed would be reluctant to do much more regardless of unemployment. And payroll employment was up 117,000 in July -- a bad number for most Fed's, but promising given the past few months, which means Bernanke will stand pat.
I was, admittedly, surprised at the July inflation numbers, as reduced inflation in automobiles stemming from the tsunami was already built in, and the increase in the core rate fell only from .3% to .2% in July, due to countervailing increases in the price of services, including shelter.
This is the highest the 12 month change in core inflation has been for over 2 1/2 years. I definitely don't see the Fed doing more. In fact, I would expect Bernanke to give stern warnings about an exit strategy if inflation doesn't slow in the coming months (which, I predict, is likely).