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July 24, 2008 7:37:19 AM CDT

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Did Fed Freak With Emergency Rate Cut?

Posted Jan 23, 08 10:13 AM CST in Business 

(Newser) – Yesterday's steep interest rate cut—just a week ahead of a scheduled policy meeting—made the staid Federal Reserve come across as spooked and jumpy, leaving many to wonder if the Fed knows of worse news to come, Reuters' Ros Krasny writes. The surprise .75-point cut "is a declaration of a state of emergency for the US markets and the economy," a market strategist said.

Another went with a medical metaphor, calling it "emergency-room-style policy," with the Fed responding to an economy and financial system "going into cardiac arrest." The perception that they were forced by the markets into the move undermines the Fed's  credibility, one fund manager notes. And an economist adds that announcing that you're going into a recession becomes a self-fulfilling prophecy.

Source Reuters

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Federal Reserve Board Chairman, Ben Bernanke, speaks at the CATO Institute's annual Monetary Conference in Washington in this Nov. 14, 2007 file photo. (AP Photo/Caleb Jones, File)   (Associated Press)
Traders work on the floor of the Brazilian Mercantile and Futures Exchange in Sao Paulo, Tuesday, Jan. 22, 2008. The Brazilian real closed stronger against the U.S. dollar Tuesday following the U.S. Federal...   (Associated Press)
Trader David R. Campanile, left, and others react in the Standard & Poor's 500 futures pit at the Chicago Mercantile Exchange in Chicago on Wednesday, Oct. 31, 2007. The Federal Reserve, confronted with...   (Associated Press)
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Federal Reserve  • recession  • Ben Bernanke  • interest rate cut  • Asian markets  • financial markets  • European markets


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