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October 31, 2007
A final thought on today's Fed move
Here's one paragraph from the Wall Street Journal article on the move.
Stocks and bonds sold off on the news. The Dow Jones Industrial Average ,up over 80 points before the Fed's afternoon announcement, initially fell into negative territory. Long-term bond prices, which move in the opposite direction of yields, fell. The statement appears to sharply reduce the odds the Fed will cut rates again at its December meeting, as markets had expected.
Please excuse my shouting for just a moment.... GOOD! Maybe they'll take it to heart this time.
There, now I feel better.
Comments are coming in fast and furious to the Journal's Real Time Economics blog. They are overwhelmingly harsh. Personally, I don't share that harsh assessment that this was the wrong thing to do. I don't think this was a decision that they wanted to make. Certainly it is not a decision that they thought they would have to make a few weeks ago. If they could go back and do a couple things differently, they might be tempted. Given the way things evolved, they did the best they could, came up with a better statement, and maybe learned a thing or two. Could be worse.
Posted by William Polley at October 31, 2007 1:58 PM
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Comments
There are two issues.
One is liquidity and the Fed is taking care of this problem with the 75 basis point cut.
The second is solvency, and the Fed says that the markets and the private economy have to solve that.
But by cutting rates the Fed is giving the private sector more time to deal with the problem.
Given the numerous conflicting info this seemed to be the preferred move as far as I am concerned.
Posted by: spencer at October 31, 2007 3:40 PM
I don't think that the recent Fed rate cut was the correct move. There seems to be strength in economic data. Even though Wall Street may be feeling some pain, it is because of poor risk management decisions they made.
I fear about the long term prospects of the dollar. Inflation is happening simply because we are in a global economy, and goods are now more expensive to buy for Americans.
A weak dollar policy is not a good long term policy.
Posted by: jeff at November 4, 2007 8:46 AM