Federal Reserve: Agressive Rate Cut Seen for Later Today
October 29th, 2008Via: Bloomberg:
The Federal Reserve may lower its benchmark interest rate to 1 percent today and signal further reductions to levels unseen since Dwight Eisenhower was president.
Tumbling commodities prices and weaker consumer spending are slowing inflation, which officials described as a “significant concern” at their last scheduled meeting in September. Tomorrow, the Commerce Department will probably report that the economy shrank at a 0.5 percent annual rate in the third quarter, the most since the 2001 recession, economists predict.
The Fed “will be very aggressive,” said Mark Gertler, a New York University economist and research co-author with Fed Chairman Ben S. Bernanke. “Inflation risks are off the table” and “the issue now is how bad the recession will be.”
He predicted the benchmark rate will be cut by half a point today, matching the median forecast of economists surveyed by Bloomberg News. Bernanke and his team could push borrowing costs to zero by June if the credit crunch intensifies, Gertler said.
The Fed has already cut the benchmark rate from 5.25 percent in the past 13 months and created six lending programs channeling more than $1 trillion into the financial system. Banks are still reluctant to lend to each other and the Standard & Poor’s 500 Index is down almost 36 percent this year, even after yesterday’s surge.
The FOMC is scheduled to announce its decision on rates at about 2:15 p.m. in Washington.
`Inadequate Growth’
“The predominant concern will be inadequate growth,” said former Fed Governor Lyle Gramley, now a Washington-based senior economic adviser for Stanford Group Co., a wealth-management firm. “If the economy shows additional signs of a deepening recession, I think the Fed will decide that the floor is not 1 percent.”
Gramley predicts that policy makers will again cut the main rate by 0.5 percentage point at their next scheduled meeting in December, pushing it toward levels last seen in 1958. “Zero is a possibility,” he said.
Bernanke and his team could push borrowing costs to zero by June if the credit crunch intensifies, Gertler said.
If this doesn’t say, “Shrieking, arm-flailing, running-around-in-circles desperation”, then what pray tell does?
Wow. Now that move really helped out the dollar now didn’t it? as per Franklin (all my dollar links have mysteriously vanished)
“My, O, my, all it took was a leeetle rate-lowering announcement from the Fed & the US Dollar Indexcame a-tumblin’ down. Dropped 172.4 basis points today, another 100 bp yesterday, who knows what she’ll do tomorrow. We remember the proverb,”What goeth straight up soon goeth straight down.” Dollar must be acting in accord with its true fundamentals, which are the same as a drowning man floating in the Pacific Ocean wearing a steel helmet and having 200 lb. anvils tied to each foot.”
I dunno. I peed my pants several times laughing last night reading something somewhere about “keeping your powder dry” in times like these, and talking to an old friend who used to be on Nixon’s Enemies List. This man has built furniture from his home for how long now? 30 plus years. Sounds to me like he is thriving. Home schooled his children etc.
I guess the world might go to hell in hand basket if the yuan becomes the world currency. Maybe, maybe not.
This also was a good read.
Sounds like big egos are more of a problem than anything else.