Yeah, Yeah, The Fed Will Cut Rates Today. But, Then What?

Posted on January 30, 2008
Filed Under Inflation, Interest Rates, Investing, Stock Market |

No one is watching the Fed today to see if they will cut the funds and discount rates. They will. There isn’t really all that much debate about whether it will be a .25 or .50 cut in the funds rate. Just, for the record, I think it will be .50, especially with the economic data released this morning. Everything points to a dramatic drop-off in consumer confidence and spending in December 2007.

But, everyone is watching them for hints about “what’s next?”

The verbiage accompanying the cut announcement is what everyone is interest in today. Will it hint the Fed is willing to cut more, even between meetings, as more data becomes available? Or, do they hint they are more worried about inflation and are going to be slower in doing more cuts.

Traders in the stock market would like a funds rate of ZERO, likewise for the discount rate. But, how much will the over-react if the Fed says they are going to take a wait and see attitude going forward? That is where the interesting stuff lies today.

Comments

One Response to “Yeah, Yeah, The Fed Will Cut Rates Today. But, Then What?”

  1. Tim on January 30th, 2008 2:29 pm

    Fifty basis point reduction.

    http://fieldguideforinvestors.com/articles/federal-funds-and-discount-rate-cut-50-basis-points

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