Filed under: Bad news, Economic data, Federal Reserve, Recession

The Federal Reserve is indicating that more rate cuts are on the way as a recession has probably begun and the financial markets are still troubled. According to Bloomberg, Fed chairman Bernanke told “lawmakers that the central bank is “ready to respond to whatever situation evolves,” and cited “considerable stress” in markets.”

The rate cuts may do no good. Banks still appear to have a large number of troubled securities on their balance sheets. A huge write-off at UBS (NYSE:UBS) and forecasts of lower earnings at banks and brokerages for the first quarter are an indication that the pain for these firms could continue well into the year. Goldman Sachs (NYSE:GS) recently estimated that total write-downs at financial firms could hit $460 billion.

The reduction in interest rates by the Fed may also do nothing for the consumer. Banks are not passing on lower rates to customers in the form of better deals on mortgages and credit cards. Financial firms are also not improving rates for loaning to small businesses. Even with cheaper money available, banks do not want to take any more risks with homeowners or small businesses.

Fed rate cuts aren’t what they used to be.

Douglas A. McIntyre is an editor at 247wallst.com.

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This entry was posted on Sunday, April 6th, 2008 at 4:15 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.