Economists Largely Positive Following Fed Rate Cut

The Federal Reserve cut its fed funds target rate by 50 basis points to 3%, as most economists expected they would, bringing the eight-day rate drop to a huge 1.25%. Economists were largely positive in their comments about the decision.

• "They are not in panic mode. They are focused on the real economy, and they need to cut rates. Let's face it, they were behind the curve before and now they are trying to get to where they think they should be... At some point, the market is going to wake up and realize this is good for the U.S. economy." -- Ken Landon, JPMorgan Chase
• "This is certainly constructive. It weakens the dollar and it tends to be inflationary, so this is a plus for gold. And I think it will help continue the upward trend that we've been seeing in gold. This is going to help all the precious metals and should help the copper market as well." "I think the gains in copper are probably exaggerated. But certainly we are going to have more stimulative activity. And the Fed left open the possibility of further rate cuts. That was very significant." -- Bill O'Neill, Managing Partner, Logic Advisors
• "The statement repeats that there is downside risk to growth but drops 'appreciable' and says in addition that the policy action so far 'should promote moderate growth over time.' They are still ready to 'act in a timely manner as needed,' but the hint here is that they think further easing will be much slower - markets permitting." -- Ian Shepherdson, High Frequency Economics
• "The Fed looks foolish. It seems they're afraid of the market. Everyone knows that it takes a while for 75 basis points to get through the economy and by cutting 50 now, I just think they're not leaving much room in the future." -- David Greenwald, Scalene Capital Management
• "The language in the statement was fairly strong, suggesting the Fed is still worried with the possibility of further deterioration in the U.S. economy. This move, combined with last week's cut should be enough for them to address some of these worries and they are probably done for now." -- Mark Meadows, Tempus Consulting
• "This move means support for the economy, but nine months or so from now. This isn't a short-term fix." -- Tim Evans, Citigroup
• "It's a convincing move, but expected. It's going to help ease the situation in the credit markets and in availability of loans to smaller business where there might have been some credit tightening. Whether it's enough to ward off a recession still remains to be seen. I think we'll have a better clue on Friday when we see the jobs report." -- Fred Dickson, D.A. Davidson & Co.
• "The Federal Reserve is panicking and they have been panicking for the past 10 days -- we have gotten 125 basis points. It's too late to help the housing market. It is already stuck. The time to do this was back in August before you allowed a culture of defaults to develop between media saturation of upcoming reset problems and political grandstanding. If they had cut rates back in August, they would have avoided a certain increment of the housing problem but people have already defaulted." -- Jeffrey Gundlach, TCW Group

Quotes from Reuters Knowledge Base

Comments

[jaytrade:]

Ya ! Thanks for the info, and I agree, but the market knows better than you and me, and it took it negatively !

The market, specially at certain times, behaves like it is controlled unnaturally by some powerful force. And probably it is being manipulated by the big money. When it is on the long side, the market moves up, and the market goes down when it is sitting on shorts, no matter what the news is. You see, they can't lose money ! You, me, and the average Joe can.

At this time, the big money is most probably on the short side. They are trying to push the R-word real hard, and creating a negative psychology; because hey, then the shorting profit will be maximum - the hell with the economy, they don't care about the thousands of average Americans who would lose their jobs in a recession !

Hey, remember, the same kind of mentality sold our Industrial muscle to the foreigners, in the name of globalization, for the sake of more profit !! May be that is the dark side of Capitalism - I may sell my mother for a buck !!!

2008 Jan 30 06:14 PM

[finance ninja:]

I liked the quote on "This move means support for the economy, but nine months or so from now. This isn't a short-term fix." -- Tim Evans, Citigroup because its true. we will see most likely further downtrends in the market because it will take months before companies get relief and hey just in time for the presidential election!! how interesting...

last time the Fed did this in the 1990's with bill clinton the market fell after surprise then 2nd expected cut. i'm curious if the same will happen since the situation is the same.

-finance ninja
financeninja.wordpress...

2008 Jan 30 09:39 PM

[MSmailbox:]

I think that the Fed did, what it had to do... Now, it's up to us not to misapproprite this fresh liquidity. I certainly hope that the mortgage lenders have learned their lessons and that further regulation will not be require, but I believe that it will. I don't trust giving an addict more drugs, unless there is someone to give objective "advice" on how to taper off. I don't wish to see this crazy-train resume it's prior direction, loaded with a fresh head of steam! In the future, those bastards must live with the loans that they've made, for better or for worse! The alternative scenario will destroy US.

Also, let's encourage the banks to narrow the spread between the rates they charge and the rates they pay. This will keep them fiscally fit and serving the best interests of America, as a whole. Bankers are really patriots, they just need a little guidance, that's all.

2008 Jan 30 11:28 PM