Wednesday, October 29, 2008

Fed Cuts Interest Rates By 0.5 Percent

The Federal Reserve followed through today on expectations once again, cutting interest rates by 0.5 percent. Tim Iacono from The Mess That Greenspan Made looks closer at the latest interest rate cut, and compares it to past cuts.

With today's half-point cut to short-term interest rates, the Federal Reserve is once again back out "in front of the curve"... well, at least in front of the curve from a few years ago.
IMAGEThis morning's announcement that the Fed has once again lowered short-term interest rates to the freakishly low level of 1.0 percent was widely expected, particularly since the effective Fed funds rate has been below that level for weeks now, averaging just 0.82 percent since October 10th.

here were some major changes to the policy statement as shown below. In fact, Compare It!, the software program used to detect subtle changes to the wording was stymied, finding many, many more differences (in red) than similarities (in blue).
It's good to know that certain passages have remained unchanged - that "the Committee expects inflation to moderate" and they "will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability".

As for what has changed, there is a rather sobering assessment of the current state of the rapidly deteriorating economy with special emphasis given to the slowdown in consumer spending and business spending.

They really do "monitor economic and financial developments" and "act as needed".

This article has been reposted from The Mess That Greenspan Made. The full post can also be viewed on The Mess That Greenspan Made.

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