The Fed cuts the Fed Funds Rate by 75 bp
18 March, 2008, 18:23. Posted by Zarathustra
Tags: Fed Funds Rate, Federal Reserve, US
See what Ben Bernanke’s doctoral thesis advisor said about the Chairman:
Federal Reserve Chairman Ben S. Bernanke has the skills to guide the U.S. economy through a credit squeeze, now in its eighth month, said Bank of Israel Governor Stanley Fischer.
"You can inject liquidity in the economy and it happens that Ben Bernanke is an expert on this issue,” Fischer, 64, who advised the Fed chief on his doctoral thesis at the Massachusetts Institute of Technology in the 1970s, said in an interview in his Jerusalem office yesterday. "That the Fed will get on top of this, I don’t doubt.”
A student of the Great Depression, Bernanke is rewriting the Fed’s play-book as he seeks to prevent a financial market meltdown and recession. Economists say the central bank will cut its key interest rate by at least 75 basis points today. Two days ago, the Fed lowered its rate on direct loans to banks and became lender of last resort to the biggest dealers in U.S. government bonds.
And here comes the further cut in Fed Funds Rate by 75 basis point. Would the market become disappointed as the cut is not the market consensus of 100 basis point?
From Bloomberg:
The Federal Reserve cut its main lending rate by three quarters of a percentage point to 2.25 percent as officials try to prop up the faltering economy and restore faith in the U.S. financial system…
…The Fed Board of Governors also voted to lower the discount rate, the cost of direct loans from the central bank, to 2.5 percent. Officials reduced the normal 1-point spread over the federal funds rate in August to a half point to ease liquidity constraints. They further narrowed the difference on March 16, in the first weekend emergency move since 1979.
No matter what, it is time for me to sleep. It is 2:23am in Hong Kong. Of course I am not staying up late to wait for the rate cut.
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About Zarathustra
Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.