December 11, 2007

THEY CAN'T CUT FAST ENOUGH TO KEEP PACE WITH DEFLATION (via John Resnick):

Fed Cuts Interest Rate a Quarter Point (AP, December 11, 2007)

The reduction in the federal funds rate to 4.25 percent marked the third rate cut in the past three months. Fed officials signaled that further cuts were possible if a severe housing downturn and mortgage lending crisis get worse.

But Wall Street was looking for a much stronger sign. The Dow Jones industrial average, which had been up about 40 points in afternoon trading, plunged by more than 200 points as investors deciphered the Fed's comments. [...]

The Fed vote for the rate cut was 9 to 1 with Eric S. Rosengren dissenting, arguing for a bigger, half-point cut in the funds rate.


Consider just the fact of continued productivity gains, that housing prices are falling despite coming shortages and the still rising household net worth and you can see that keeping rates so artificially high is a function of dogma rather than reality.

Posted by Orrin Judd at December 11, 2007 3:52 PM
Comments for this post are closed.