Is the Fed Confused? Or Interested in Confusing?

The Fed has delivered a 75-bps cut to 2.25%, which splits the difference between the two most likely scenarios from the Cleveland Fed. Ben Bernanke has compromised, like any good academic chair should.

But this strikes me as somewhat confused. Is it inflation you're worried about? Is it the financial services industry bailout? What is it? Why not get in front of the 2-year and call it a day? Why dodder around fretting about inflation if you really think you're facing a credit market meltdown? And to have two dissenters is definitely material, both citing inflation as a concern. When is the last time we had two dissenters on a Fed rate cut/increase?

Don't get me wrong. I was pulling for a sizable rate cut. But this Fed's inability/unwillingness to get ahead of markets on rates is almost as irritating as these make-everyone-happy compromises. Damn academics.

Comments

[CM in MA:]

Just when the Fed had started to look and act strong they get into a twist about 25 basis points--with two members looking to cut even less! The last 18 months is strewn with missteps and missed opportunities by the Fed. Still, even today, they had a chance to take hold of events instead of being held hostage by them. To be worried about inflation is just plain silly. So, the game will go on with the market leading a Fed that just looks lost, dazed and confused.

2008 Mar 18 02:56 PM

[Francis:]

All the cheer leading for aggressive rate cuts by the Fed ignore the consequence of these cuts, the destruction of the USD.

Why is concern about inflation silly? Why not just reduce the rate to 0.0% and be done with it?

There are no good options at this stage in the game, but personally I'm more concerned about the destruction of the USD. I would have preferred to see the Feds act to prop up the $...

2008 Mar 18 03:38 PM

[scobbydube:]

I am with you on that one Francis.. Rates at 0 will not get this economy going and what about all those savers out there, what do they get for being conservation and in my opinion smart, lower interest rates on savings accounts and money market account.. What this country needs is more savers and not spenders who are living way beyond their means as is the country.. I guess that is asking too much..

2008 Mar 18 03:48 PM

[CM in MA:]

For now, the government (Fed, Congress and President) seem more concerned with half measures. The Fed, working with Congress, could send the economy soaring by mopping up the excess dollars printed in recent years along with making the 2003 tax cuts permanent. Absent that, the worry about inflation is silly compared to the unwillingness of lenders to lend. So if the Fed is going to rely primarily on interest rate cuts ( I know, they've taken other steps), then best to cut the Fed Funds rate below the 2-yr rate and get it over with. Then deal with inflation once the credit markets are unstuck.

2008 Mar 18 04:05 PM

[CM in MA:]

seekingalpha.com/artic...

2008 Mar 18 04:16 PM