Friday, November 2, 2007

Guess What? Fed Cuts Interest Rates Again.


...cut interest rates for the second time in six weeks signifying that the central bankers — for the moment — are more concerned with the recent turmoil in the financial markets and possible weakness in the economy than with fighting inflation.

Despite a report showing stronger-than-expected economic growth in the third quarter, the Fed cut the benchmark overnight rate a quarter-point to 4.5 percent, and made a similar quarter-point cut in the less-important discount rate. The move had been widely anticipated by financial markets, as futures traders had placed bets on a quarter-point cut.

No, they're just trying to ease investors who had a really bad day when they thought the cut wouldn't happen.

To emphasize the point, the FOMC highlighted concerns about higher oil and other commodity prices and said the central bank would “continue to monitor inflation developments carefully.”

The careful choice of words was seen by some as a sign that the central bank is trying to avoid the impression that its policy decision placed the interests of the finacial markets ahead of the its broader mandate to promote economic growth and stable prices.

In other words...the Fed placed Wall Street before you or me. Surprised?

“Expectations are that the holiday season will be relatively flat,” said John Lonski, chief economist at Moody’s Investor Service. “And as we look ahead, we don’t have a strong reason to believe that hiring activity will be strong enough to offset the weakness from possibly lower home prices.”

Just like I said, Christmas is going to be an indicator of the future. If we don't see strong enough growth on Christmas, the markets are going to suffer.

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