Fed blog: Fed cuts rates
Untitled DocumentFed cuts rates by 3/4 point
Just eight days before a regularly scheduled meeting, the Federal Open Market Committee took aggressive action, slashing short-term interest rates by three-quarters of a percentage point. The federal funds rate is now 3.5 percent, and the prime rate will subsequently decline to 6.5 percent.
In doing so today, as opposed to last week when it was a drumbeat of one poor economic release after another, the Fed will open itself to criticism of pandering to stock investors and being too far behind the curve to help the economy avert recession. Global stock indices have declined by more than 10 percent in some cases, just this week.
Only one member of the FOMC voted against the move, while another was absent and did not vote.
The Fed has now cut by a total of 175 basis points since September, and given the lag time between Fed action and the impact on the broader economy, more movement is likely at next week’s meeting.
Is the Fed pandering to investors? Is the Fed too far behind the curve? Will the Fed’s actions be enough to avert a recession? Let me know your thoughts.