August 17, 2007


Bernanke Blinks and Wall Street Rallies (James Pethokoukis, August 17, 2007, US News)

"Fed says 'no más,'" is how JPMorgan economist Bruce Kasman succinctly summed up the Federal Reserve's decision to cut the discount rate—the rate it charges banks on loans they receive from the Fed's so-called discount window—in his morning note to clients. And little wonder why: The whole global financial system seemed to be going a bit pear-shaped as the week ended. Even though Wall Street staged a late-day rally yesterday, Japan's benchmark Nikkei fell 5.4 percent overnight, its biggest drop in seven years.

The Fed move was a surprise, but its statement was even more so. Such a between-meetings statement is rare, and the language strongly hinted that the Fed will cut the federal funds rate in September. The Federal Reserve Open Market Committee noted: "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth forward.... the downside risks to growth have increased appreciably." In fact, Wall Street is now pricing in a series of rate cuts that would bring the fed funds rate down as much as a full percentage point to 4.25 percent.

There's never a bad time to retreat from usury.

Posted by Orrin Judd at August 17, 2007 1:46 PM

No mas!

Posted by: Benny at August 17, 2007 2:54 PM

It appears the Fed has already allowed the more important Fed Funds rate to fall below the 'target' rate of 5.25%

I posted on this at:

Another site (linked to in my post) that covers this issue very well is the Skeptical Optimist

Posted by: Kurt Brouwer at August 17, 2007 3:38 PM

JPM's Bruce Kasman might want to clamp down on the gloating a little bit. He should realize that the ideologically punch-drunk on both the Left and the Right would like nothing more than to haul up any president's nominee to chair the Fed and treat him to a Robert Bork-style inquisition on policies like today's decision. I'm pretty sure that there would be significant global ramifications toward such a show trial.

People can handle apparent Wall Street bailouts, but have major issues with the sharpies crowing about it.

Posted by: Brad S at August 17, 2007 5:19 PM