US Shock 0.75% rate reduction today

[Uncle Spielberg]

US Interest rates down by a shock 0.75% today to 3.75%, so first time since 1982they reduced them by as much and before the next meeting was due.

Whatever you say about Bush you cannot accuse him of not being bold or indecisive.

I think the rate prediction for Febuary for here is:

0.25% reduction - 1/20
0.50% reduction - 9/4 outside chance
No change - 6/1

 

[Uncle Spielberg]

Fed cuts interest rates to 3.5%

Fed chairman Ben Bernanke is aiming to shore up confidence
The Federal Reserve has cut interest rates to 3.5%, a shock three-quarters of a percentage point reduction.
Aiming to reduce the risk of the US falling into recession, the decision comes after sharp stock market declines on Wall Street and around the world.

The Fed said incoming information indicated a deepening of the housing market slump and increased unemployment levels.

One analyst said the Fed was "obviously panicked" by the threat of recession.

"Unfortunately they have no power to reverse what in my opinion is the worst post-war recession," said Michael Metz, chief investment strategist at Oppenheimer in New York.

'This is huge'

The Fed's interest move came as a complete surprise, as it was taken outside its timetabled rate-setting Open Market Committee meetings.

It certainly indicates that the Federal Reserve wants to be seen as taken action over the concerns of an economic downturn

Jeremy Stretch of Rabobank


Markets bounce after rate cut
Q&A: Stock market falls

The last two such surprise cuts were on 17 September 2001, shortly after the attacks of 11 September, and on 3 January 2001, in the wake of the dotcom bust.

The last time the Fed cut rates as much as three-quarters of a percentage point was in August 1982, almost 26 years ago.

"This is huge," said the BBC's business editor Robert Peston.

"And it is a big risk. If this doesn't work, then people will say they have nothing left in their locker."

Analyst Jeremy Stretch of Rabobank, described the Fed's move as "a sign of panic".

"But it certainly indicates that the Federal Reserve wants to be seen as taken action over the concerns of an economic downturn," he said.

Yet despite the Fed's extensive cut in rates, US investment bank Merrill Lynch said at the start of this month that, in its opinion, the American economy was already in recession.

Another investment bank, Goldman Sachs, has also warned that recession is now likely.

Sub-prime woes

The sharp downturn in the US economy has centred on the slump in the American housing market over the past year.

Against a backdrop of higher US mortgage rates, home loan defaults and repossessions hit record levels last year, specifically in the sub-prime sector.

This industry specialises in higher risk loans to people on low incomes or those with poor credit histories.

As the sub-prime mortgage sector hit crisis point, it triggered record losses at some of America's largest banks.

It also caused the global credit squeeze, as much of this sub-prime debt was repackaged into wider debt offerings that were bought by banks and other investors around the world.

As a result, global banks are now much less willing to lend to each other, or to homes and businesses, until the full extent of the sub-prime exposure is known.

 

[keaton]

Whatever you say about Bush you cannot accuse him of not being bold or indecisive.

I

I don't think many people's complaints about Bush are to do with his economic policies

 

[Uncle Spielberg]

The bloke is a wanker but he has shown a certain boldness and decisiveness with this crisis which I like.

 

[Djmiles]

The bloke is a wanker but he has shown a certain boldness and decisiveness with this crisis which I like.

He doesn't have much choice to be fair.

 

[Uncle Spielberg]

Disagree, Brown would say in a dour Scottish accent if he was in charge of rates

" I have opted for Prudency and decided to drop rates by 0.25% "

 

[Lokki 7]

It's also a pretty stupid move as it's spooked the markets into thinking things must be worse than we all initially thought to spring a cut like this, hence equities down again. Very strange decision to cut so much so soon.

 

[Rusthall Seagull]

It's also a pretty stupid move as it's spooked the markets into thinking things must be worse than we all initially thought to spring a cut like this, hence equities down again. Very strange decision to cut so much so soon.

agreed, now after initial spurt, down again....now we really could be in meltdown....

 

[beorhthelm]

its got nothing to do with bush, or at least it shouldnt have, since the interest rates are set by the independant Federal Bank.

and 0.75% does look like panic.

 

[El Presidente]

Crumbs, does this mean that financial advisor US does not know the difference between a politician and an independent central bank?

 

[Bozza]

Disagree, Brown would say in a dour Scottish accent if he was in charge of rates

" I have opted for Prudency and decided to drop rates by 0.25% "

Doesn't the Bank of England decide rates, not Brown?

 

[Uncle Spielberg]

Bush has a strong influence on the Fed's decision, Ok, he does not come on tele and say I have decided to drop rates by 0.75% but he is key in the decision making.

 

[Uncle Spielberg]

Doesn't the Bank of England decide rates, not Brown?

Yes, thats why I said

" IF BROWN WAS IN CHARGE OF RATES "

Fecking nit pickers or what, trying to be clever or what

 

[Withdean Wanderer]

Bush has a strong influence on the Fed's decision, Ok, he does not come on tele and say I have decided to drop rates by 0.75% but he is key in the decision making.

Aren't they kept independant, as to ensure rates are set for the benefit of the economy, and to avoid rates being used for political gain?

 

[Uncle Spielberg]

Believe that if you want.

 

[bigc]

Believe that if you want.

Top racing tipster and NOW expert on the american political scene.

my my, you are a man of hidden talents..

 

[Withdean Wanderer]

Believe that if you want.

Yeah I was asking for my benefit, not to correct you...as much as i'd like to be, i'm not an Economist!

I suspect you are right in this instance though!

 

[bigc]

The bloke is a wanker but he has shown a certain boldness and decisiveness with this crisis which I like.

Bush doesn't really have any power left in the US now, he is ending as he started, as a lame duck. I thought he was off in the middle east at the moment anyway?

 

[nail-Z]

US Interest rates down by a shock 0.75% today to 3.75%, so first time since 1982they reduced them by as much and before the next meeting was due.

Whatever you say about Bush you cannot accuse him of not being bold or indecisive.

I think the rate prediction for Febuary for here is:

0.25% reduction - 1/20
0.50% reduction - 9/4 outside chance
No change - 6/1

What sort of odds do you call those? Unless you mean 1/2 rather than 1/20?

 

[readingstockport]

Oh come on Uncle, getting panicked and being bounced into a descision which, if he had been bold and descisive 6 months ago would not have been required, is not being bold and descisive.

It's being ordered by his corporate backers to do something NOW or they will pull the plug imediately and his farce of a presidency ends now before he finally crawls away in disgrace in 12 months time.