Fed Cuts Another 50 Bps

Thursday, January 31, 2008

The Fed has released the FOMC statement for this month and voted to reduce the overnight lending rate 50 basis points to 3%.

This reflects the lowest rates have been since June of 2005. The move was made easier after GDP numbers came out this morning lower than expected, mostly on negative housing growth.

The Fed felt it had to lower rates because inflation is not a concern, the economy is spiralling into recession (out of fear, possibly), the market had already priced it in, and today's GDP numbers proved that the economy needs a shot in the arm to pull out of a recession quickly.

You can argue that a little recession would be good, but you can't convince Wall Street of that, and obvious signs of fear and lack of confidence there made the Fed's decision fairly easy.

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