Fed Cuts Rates 25 Basis Points

The FOMC decided today to lower its target for the federal funds rate 25 basis points to 2.00% today. Here are some of the highlights from the accompanying statement:

• Recent information indicates that economic activity remains weak.
• Household and business spending has been subdued and labor markets have softened further.
• Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.
• Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months.
• The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.
• Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.
• The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity.
• The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

So it looks like the signal is that they are done for awhile at 2.0%, which isn't bad. They have already lowered rates a ton (from 5.25%), and all of those cuts will continue to work their way into the economy since there is a lag.

Further cuts would pressure the dollar more and exacerbate the spike in commodities. The stock market seems to like the moves so far, but it will be interesting to see how the dollar fares in the coming days and weeks.