Tuesday, 22 January 2008

Break News: The Fed is Cutting Rate 4.25% to 3.5%

WOW....an intermeeting rate cut...looks like the situation is out of control...

The Fed said incoming information indicated a deepening of the housing market slump and a softening of the labour market.
Traders had anticipated 75 basis points of rate cuts this month, according to futures prices on the Chicago Board of Trade. Today's reduction was the biggest since October 1984, when the central bank lowered the rate by 1.75 percentage point.
Federal Reserve Statement, 22 Jan 2008 :
"The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. "

"Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

"The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully."

"Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks."

Source: CNN , Bloomberg

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