a lot to say Friday: His talk on housing and monetary policy, at a Fed retreat in Wyoming, was more than 5,400 words long, not counting footnotes and citations.

But he remained mysterious on the central question of what will be done about interest rates at the next official meeting of the policy-setting Federal Open Market Committee (FOMC) on Sept. 18. Yet, nearly everyone still expects the Fed to cut rates to ease the economic damage of this summer's credit crisis.

Not a Sure Thing

Bernanke seemed open to a rate cut—if conditions warrant. "The Federal Reserve stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of the markets," he said in his speech.

But, he immediately added: "It is not the responsibility of the Federal Reserve—nor would it be appropriate—to protect lenders and investors from the consequences of their financial decisions." Here he alluded to the much discussed "moral hazard" argument, the worry that a rate cut might encourage more reckless risk-taking.

Throwing another bone to the rate-cut crowd, he said this: "But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy."

Academic Address

The stock market rallied in the wake of Bernanke's speech, with the Standard & Poor's 500-stock index up 1.2%. It's possible bullish investors were also reacting to good economic data released Friday, as well as an announcement by President George W. Bush that the government would help out some homeowners in mortgage trouble.

"In short," wrote Lehman Brothers (LEH) economist Drew Matus, "Bernanke did not commit the Fed to any course of action while reminding market participants that the Fed is not 'out of touch.'" Peter Cardillo, chief market economist at Avalon Partners, praised Bernanke's speech as the best markets could hope for: "[Bernanke] said today: 'No bailout. [But] if need be, we will cut interest rates.'"

These concise summaries can be applied to such a long speech because much of Bernanke's talk dwelled on academic subjects most investors care little about. Bernanke, once chairman of Princeton University's economics department, talked mostly about the history of mortgage markets in the 20th century.

In fairness to Bernanke, his audience at the retreat was expecting an academic address. Also, Bernanke, as just one member of the FOMC, is reluctant to speak for the entire Fed.

Lacking Clarity

Nonetheless, many were hoping Bernanke would focus a bit more on current events. "There still seems to be an aloofness from what's been happening on the credit markets," says Ward McCarthy, managing director of Stone & McCarthy Research Associates. He was looking for Bernanke to better explain his thinking, especially why the Fed apparently underestimated the effects of subprime mortgages. There is a lack of confidence, McCarthy says, that the policymakers "have their hands around the problem."

Before Bernanke's speech, a half-point drop in the federal funds rate was considered likely on futures markets. Now, more traders are betting on a quarter-point drop. Few economists or traders expect the Fed to hold rates steady.