Saturday, March 15, 2008

Fed may cut IR by 1%

Bear Stearns crisis may force US Fed to slash rates again

The Federal Reserve could cut interest rates by more than one percentage point in a bid to stabilise financial markets in the wake of Bear Stearns' collapse. At its scheduled meeting next Tuesday the Federal Open Markets Committee is expected to slash its base lending rate in order to lift the economy out of recession and alleviate the problems of the credit crisis

Posted by who stole my pension? @ 06:53 AM (745 views)
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5 thoughts on “Fed may cut IR by 1%

  • “To a man with a hammer, everything looks like a nail.”

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  • Everything looks like a hammer and it isnt till they bang it hard they realise its a screw, and then discover that they are in fact screwed no matter what they do.

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  • I think by the end of the month, Trichet will be under considerable pressure to cut rates too.

    This is already coming from:
    * Spain’s finance minister (& others).

    * the EU slip in competitiveness of the Euro vs the Dollar. (Airbus vs Boeing).

    * The Fed who wants all central banks working together.

    ….. no worries for the BoE, of course. Captain Darling told us the UK had a sustainable economy about 20 times in a speech last week……

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  • Not too sure we’ll see rate cuts in Europe so soon. This week’s Euro inflation figures came in at 3.3%, higher than expected. The ECB is hawkish on inflation. Also: There is a dilemma to let the Euro depreciate against the USD because of high energy costs denominated in USD. That would add to inflation pressure. Re competitiveness of Euroland, that’s an important point of course but – unlike the Fed – the ECB does not target economic growth as much in its policy. It would take a big political fall-out from Club Med/Ireland for anything big shift to happen.

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  • “There is a dilemma to let the Euro depreciate against the USD because of high energy costs denominated in USD.”

    But there is also a dilemma in that not helping the dollar will result in energy prices appreciating faster than the euro is appreciating against the dollar. I think alan might be correct here: Trichet already is under huge pressure to cut. However, IMHO, he may leave it for a couple of months more.

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