Here's a link to the statement
Here's the money parts:
Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Allow me to pay myself on the back. I was right in 2/3 of my predictions. Not bad.
8 comments:
If any Americans reading this had any foreign travel plans you might want to reprice things.
Say goodbye to the dollar folks.
I didn't actually believe wallstreet dictated these things. Turns out I was wrong.
I too was surprised about the 50 bp.
For a man who has exhibited great caution to this point, this was not a "cautious" move. I am wondering what he knows that pushed him to this greater change.
More than one person has said that we are just in 'the eye of the hurricane' today.
The fed may be "spooked" but the stock market and CNBC crowd are happy. Oh well. I guess I'm am not really surprised. It seems to my uneducated observations that the idea is to just keep the stock market happy... until the next president/party is in control, and then let THEM take the blame for the obviously needed correction. Just looks like it.... to me.
Grandma Jo
I guess the Fed is much more spooked than it talks. Look on the bright side, though. This will just make it easier for him to crank down the "anti-inflation" ratchets against the Democratic President in 2009, once the horse has left the burning barn. Won't he also be able to rail against the Democratic President and Congress regarding the collapsing dollar by then too? It will all be the Democrats' fault. It's precisely what Nixon and Ford did in the 1970s, leaving Carter to reap the whirlwind by the end of the decade.
I was always told that the top economists, the ones walking around with nobel prizes, were right about 1/3rd of the time.
I'll be sure to send my recommendation to tne nobel committee for you :)
As for the cut, it seems to me that this is a bit of shock therapy. It reminds me of back when Greenspan, a few years ago, made no rate increase at the fed meeting, then a couple weeks later, suddenly bumped the rates up.
In this case, the markets were freaking out, and so I believe this was an effort at panic reduction. Far more a psychological move than a financial move. In the end, I don't see how it would solve the real problem right now which is a confidence crisis, not really a liquidity crisis.
A couple of weeks ago everyone expected a 25 reduction, with the recent liquidity crisis I think many if not most analysts had moved to 50. It pleases the banks and Wall Street who call the shots.
Grandma Jo, you are exactly right. They are attempting to float the boat into 2008 -- hopefully it will keep floating and not sink.
The next decade will not be pretty, or fun to watch. The Dems are being set up to take all the blame for the last decade of excess.
The "Bernanke put" is now and forever established in the lexicon of 21st Centry American economics.
It'll come back to haunt. Big time.
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