rte.ie/business/2007/1031/fed.html
The Federal Reserve has cut its main interest rate by a quarter of a percentage point to 4.5% to shore up the country’s housing sector and struggling credit markets. The central bank’s move had been widely anticipated by the financial markets.
The rate cut marks the second reduction in the federal funds short-term rate in as many months. Fed officials are concerned that the housing slump could destabilise the wider economy.
The rate reduction also offers fresh relief to credit markets, which have tightened since major banks disclosed hefty losses tied to mortgage-backed securities.
‘The pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction,’ the Fed said in a statement announcing its decision. The central bank said its action was designed to help ‘promote moderate growth over time’.
But it also warned that recent increases in energy and commodity prices could stoke renewed inflationary pressures. It said that after this rate cut, the risk of higher inflation roughly balanced the risk of lower economic growth. This was seen as indicating that further interest rate cuts are far from certain.
Doh!
It was expected. Interest rate futures were pricing in a 10% chance that they’d leave it unchanged. Would have been a big shock if they hadn’t.
Fed Lowers Benchmark Rate a Quarter Point, Signals Reluctance to Cut Again
bloomberg.com/apps/news?pid= … refer=home
Oct. 31 (Bloomberg) – The Federal Reserve cut its benchmark interest rate by a quarter point to 4.5 percent and signaled it’s reluctant to lower borrowing costs further.
The second reduction in as many months should help the U.S. economy withstand the fallout from August’s credit collapse, the Federal Open Market Committee said in a statement after meeting today in Washington. ``After this action, the upside risks to inflation roughly balance the downside risks to growth.‘’
The language has all the sublety of a sledgehammer,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. The FOMC has just stated unequivocally that `we think we are done easing.’ Whether they are or not remains to be seen, but the message is loud and clear.‘’
Hours earlier, the Commerce Department reported that economic growth accelerated to an annual pace of 3.9 percent in the third quarter, the fastest in more than a year. The Fed statement also warned that higher energy and commodity prices may spur faster inflation.
Stocks fell in the minutes after the Fed announcement, before resuming their rally. The Dow Jones Industrial Average climbed 1 percent to 13,930.01. The yield on the 10-year Treasury note jumped to 4.46 percent as of 4:10 p.m. in New York, from 4.38 percent late yesterday.
xman
November 1, 2007, 12:49am
3
Helicopter Ben to the rescue!
The US dollar printing presses are going to run out of ink. Fiat currency? More like Lada.
I visualise Chavez rubbing his thighs with so much glee, the friction causes a small fire and he needs his cabana boy to put it out…
I picture the chinese holding an emergency meeting of whatever shitty named grouping they are calling the perjorative leadership of the proletariat these days and saying, man, I thought we could trust these amerikats.
Turns out, they are as inscrutable as the Chinese!!!
Maybe its just the cynic in me, but I wouldn’t be surprised if this quote was just a sop to the fight-inflation brigade.
