Fed Cuts 75 Basis Points

The Federal Reserve this afternoon announced a 75bp rate cut for federal funds, from 3% to 2.25%. The vote was 7-2, with Fisher and Plosser dissenting - they 'preferred less aggressive action at this meeting.' The Board of Governors simultaneously approved a 75bp cut in the discount rate, bringing it down to 2.5%

The markets had expected a more aggressive rate cut of a full point, but the main indexes pulled back only mildly in the immediate wake of the announcement.

The FOMC statement:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.

Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.

Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, and San Francisco.

Comments

[menthatmeanjustwhattheysay]

America is built on debt and spending.

Without compulsive spending and conspicuous consumption we would fail as a country.

70% of our 'economic heath,' better termed as 'economic sickness' is based on consumer spending. When the consumer can't compulsively spend any longer our economy collapses...we are not a healthy country.

China on the other hand is built on selling its output not only to its countries citizens but the entire world...especially the USA. America has become the bitch of China.

With one breath we talk about cutting global warming and how we have to cut our dependence of fossil fuel.

Then with the next breath we demand no cut backs in our standard of living, we must spend and consume above all else...build more, build faster, build bigger.

The GDP must only go up, up and away...all the while this consumption just increases global warming and keeps depleting the fossil fuels faster and faster. Sick...sick..sick mentality, buy more cars, build more houses and monstrosities of architecture, spend more but 'cut back' to save our dear fossil fuels.

And leading the pack of over consumers is the USA.

www.nationmaster.com/graph/ene_oil_con-e...

Consumption is ingrained in us and we know no other way. And even if we wished to amend our ways, how could all our retirement funds take the hit?

You see we have the tiger by the tail and cannot let go...but our grip is getting tired and all hell is going to break loose soon.

Our world population has grown to levels where it has passed the point of no return for supporting a sustainable human population as we know it today when it comes to their energy demands.

And what does all that consumerism lead to?

It leads to the mess we are in now and the bigger mess the world will be in once India and China pick up momentum to copycat the envious lifestyle that they have held in high esteem as the 'American Dream'

The problem is not with the earth having enough land for all its people - the problem is with earth providing ad infinitum for all the needs the people crave.

The more people born, the more heat is produced from their life and all their cravings, As such, the warmer and more polluted the earth gets and the more energy they all use and the earths resources are depleted.

Fueling the problem of consumption is the games the Federal and World banks play with interest rates. They manage the economies in ways to fuel consumption and mask the real trend.

Witness the recent cries for Federal bankers to lower interest rates...so the stock market can go up...fueled by spending of the consumer.

It is drug habit that Greenspan got us hooked on and we just can't get away from.

Our economy is not based on sustainable health - it is based low interest credit to encourage compulsive spending, debt and living a life of constant consumption with a 'disposable mentality' when it comes to durable goods.

All this consumption to artificially fuel our economy to make our retirement funds only go up contributes to more and more global warming and the depletion of our natural resources.

Then the governments juggle the numbers to make the inflation figures seem artificially low, so everyone's retirement portfolio will make them happy so they will continue to buy and consume more...and on it goes....IT IS ALL WE KNOW and the bill is coming due soon!


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