David Kirkpatrick

January 31, 2008

Another (?!) Fed rate cut

Filed under: Business — Tags: , , , — David Kirkpatrick @ 2:16 pm

I didn’t get to this yesterday, and still find it more than a bit odd and very disconcerting from an economics perspective. The Federal Reserve cut the Fed funds rate by a half point dropping the rate to three percent.

This was the second cut in eight days with a three quarter point cut last week. Even though this latest cut was somewhat expected the move strikes me as desperate, and maybe even a bit reckless, market manipulation. Basically the Fed is telling everyone it didn’t trust last week’s pretty drastic move to percolate and do its job.

The rationale is policymakers are worried about housing and jobs and indicated there could be future cuts. From an economic perspective I like to see the market largely sort itself out through difficult times, and certainly be given time to react to a strong move like last week’s cut.

This cut, barely a week later, gives me a certain amount of pause and makes me wonder what the Fed knows, fears to the point of this move, and hopes to forestall.

Here’s some numbers from the AP article linked above:

The benchmark 10-year Treasury note fell 17/32 to 104 8/32 with a yield of 3.73 percent, up from 3.68 percent late Tuesday. Prices and yields move in opposite directions.

The 30-year long bond lost 1 14/32 to 109 6/32 with a yield of 4.39 percent, up from 4.36 percent late Tuesday.

The 2-year note dropped 1/32 to 99 21/32 with a 2.29 percent yield, unchanged from Tuesday.

The Fed has reduced rates by 2.25 percentage points since September when financial markets began seizing up in response to the subprime mortgage crisis.

1 Comment »

  1. […] until it reached crisis level (I’ve been blogging about the financial meltdown since the first days of this blog) and then went into full “we’re doomed!” mode. After scaring the […]

    Pingback by The economy stumbles on « David Kirkpatrick — April 29, 2009 @ 1:49 pm

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