Wednesday, January 23, 2008

The Fed Panicked

A 0.75% rate cut - both the discount rate and the Fed Funds rate. 1 week before a scheduled Fed meeting. This is huge. A cut like this would be remarkable even at a normal meeting, but Bernanke chose to slash rates at an emergency meeting. He must have been really scared about the stock market and the economic prospects if he couldn't wait for another week. This feels disappointing. The last time the Fed slashed rates at an unscheduled meeting was after the terrorist attacks of Sept. 11, 2001. It's just plain wrong to go this far, Bernanke is sending the wrong signals and tinkering with economic fundamentals that will greatly impact businesses and the lives of individual consumers. Well, at least those who wanted a 1% cut will be happy - the Fed will meet on Jan. 30 and it might cut some more then. For the time being, happy 3.5% Fed Funds Rate.

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