The U.S. Economy: FED moves – Markets react

Posted By on January 22, 2008

Don’t look at your 401-K or IRAs if you are squeamish. Will this be an opportunity long term or a big time recession?

Open Bell
U.S. Financial Markets Numbers 1/22/2008 9:35 AM

After overseas markets headed down on worries about a U.S. recession, the FED makes an emergency cut this morning which hasn’t helped the panic (and necessary cash raising selling) on Wall Street pre-market. DOW futures were down as much as 500 points pre-market and the world bites their fingernails in fear of ‘too little – too late’ in response to the Federal Reserve cuts. Only time will tell. FED statement below.


The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3-1/2 percent.

The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.

Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Eric S. Rosengren; and Kevin M. Warsh.

Voting against was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week.

Absent and not voting was Frederic S. Mishkin.

In a related action, the Board of Governors approved a 75-basis-point decrease in the discount rate to 4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Chicago and Minneapolis.

Comments

  • This is the first time I’ve seen a market close DOW down 150 as a victory. Thankfully it wasn’t worse today.

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.