Tuesday, March 18, 2008

Fed Lowers Rates 75 basis points

Many market participants were looking for 100 basis point cut, which I think the Fed should have done, moral hazards aside. But I don't think that Bernanke could have gotten enough votes from the other memebers, so the market will have to settle for 75 bps.

Here are the headlines from the FOMC announcement:
  • FOMC lowers Fed Funds rate by 75 bps to 2.25%
  • Fed cuts the discount rate 75 bps to 2.50%; move follows the emergency 25 bps cut over the weekend
  • Fed says will act in timely manner to promote growth, price stability
  • Fed says tight credit, housing contraction likely to weigh on growth
  • Fed says Inflation Should Moderate Over Coming Quarters
  • Fed says uncertainty over inflation outlook has increased
  • Fed says outlook for economic activity has 'weakened further'
  • Fed says financial markets remain under considerable stress
  • Fed says 'downside risks to growth remain'

President Bush is also saying that they will take further action to help the economy if needed.

The Dow was up +300 points before the announcement, but has given back about 100 points so far. There is still a ton of time left in the session, so we'll just have to see how the market holds up into the close.

Many people I speak with are still calling this just another oversold bounce. I think the recent lows will prove more meaningful.


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