Tuesday, January 22, 2008

Fed cuts interest rate 3/4 of a point - many see the surprise move as "desperate"

AP:


WASHINGTON (AP) - The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three- quarters of a percentage point on Tuesday and indicated further rate cuts were likely.

The surprise reduction in the federal funds rate from 4.25 down to 3.5 percent marked the biggest one-day rate move by the central bank since it cuts its discount rate by a full percentage point in December 1991, a period when the country was struggling to get out of a recession.

Analysts said the Fed will likely delay cutting rates further at its Jan. 29 30 meeting but will probably keep moving rates down aggressively as the economy continues to weaken.


The economic problems are worldwide, so it's hard to see how this move make any difference. Asian markets are way down for the 2nd straight day. The European stock market wasn't impressed with the rate cut. Many people see the rate cut as desperate, which means the move actually back-fires. The good thing about a tanking economy is the presidential candidates will be put to a leadership test that they haven't had to deal with before. Will any of the candidates rise to the occasion? Will any of them be able to inspire the country?