Results tagged “interestrate”

There's a load of bad news: Consumer prices have dropped 1.7% last month, housing starts have dropped 18.9% ("the lowest since the government started compiling statistics in 1959"), Best Buy is offering workers voluntary severance to most of its corporate workers... Which means the Federal Reserve is poised to cut interest rates again. It's believed the Fed will cut 50 basis points from the base rate, which would then be 0.5%. CNBC reports, "Market watchers are hoping the Fed will signal quantitative easing measures, which essentially involves printing more money, to restore growth and signal an end to the ongoing recession."

After the U.S. stock market was battered yesterday, futures are rising on hopes that the central banks will do even more to help them. Yesterday, Federal Reserve Chairman Ben Bernanke suggested, as Bloomberg News reports, "he may use less conventional policies to revive the economy"--and futures for bank stocks are up about 2%. However, an independent strategist tells CNBC, "No doubt we can continue to have a short-term rally, but… if we look at the global economy, contraction is on the way, corporate earnings are coming down sharply." And an economist at RBS Greenwich Capital who spoke to Bloomberg News was also wary: "We’re looking at some pretty severe numbers for the fourth quarter, and the first quarter of 2009 will be pretty bad as well. The economy isn’t going to turn around definitively until the credit markets unclog.”

The Federal Reserve cut the key rate by half a percent, to 1%; the Fed noted, "The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures... the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit." The last time the interest rate was 1% was, according to CNBC, the "12-month period from June 2003 to June 2004." The NY Times summed up: "While Fed policy makers now have less room to maneuver on interest rates if the economy deteriorates further, investors had been hoping for the relatively aggressive cut as a sign of vigilance among American central bankers seeking to restore the free flow of credit." Right now, the stock market is relatively unchanged.

Federal Reserve Chairman discussed the current economic and financial condition (speech transcript), outlining what happened with Fannie Mae, Freddie Mac, Lehman Brothers and AIG--and what the Fed is doing--and said, "Overall, the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased."

Confirmation that it's costing more to buy your bread: Inflation is "running at the fastest pace in 17 years, which consumer prices rising 0.8% last month, twice what experts were expecting. The AP grimly reports: "It marked the third straight month of oversized inflation increases following jumps of 0.6 percent in May and 1.1 percent in June and left inflation rising by 5.6 percent over the past year, the biggest 12-month gain since January 1991." The increases were across the board, for "clothing, food, transportation and recreational products." The NY Times says that this news "suggests that a[n interest] rate increase could come sooner rather than later," because lowering interest rates might force more inflation.

The Federal Reserve lowered the federal funds rate by 25 basis points to 2%, giving this explanation:

Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters...

Continue reading "Federal Reserve Cuts Interest Rate to 2%"

After an ugly Monday in global financial markets while the U.S. markets were closed and Asian stock markets plunging today, the Federal Reserve lowered the interest rate by 0.75% in an "emergency move for the first time since 2001." From the Fed's press release:

The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets...

Continue reading "Fed Cuts Interest Rate by 0.75%, Following More Global Stock Tumult"