Filed under: Good news, Market matters, Economic data, Headline news, Federal Reserve

The Federal Open Market Committee (FOMC) lowered both the Federal Funds Rate and the Discount Rate by 0.50%. This move was designed “to forestall some of the adverse effects on the broader economy” resulting from recent financial market disruptions.

Most people were expecting that both interest rates would only be cut by 0.25%. My forecast had been that the Fed Funds Rate would be cut by 0.25% and the Discount Rate by 0.50%. The market has experienced a rally upon release of the news.

Although the Fed has expressed concern about the moral hazard of a rate cut that rescues financial market participants that assumed too much risk, the rate decision indicates that the economy is its primary concern. As I mentioned in an earlier post, the recent negative unemployment report is the key issue.

Continue reading The Fed decision: It’s the economy!

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This entry was posted on Tuesday, September 18th, 2007 at 4:46 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.