Did Fed Freak With Emergency Rate Cut?

Decision smacks of panic—and worse trouble yet to come

By Jane Yager, Newser Staff

Posted Jan 23, 2008 10:13 AM CST

(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.

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)

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)

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)

« Prev« Prev | Next »Next » Slideshow

To report an error on this story, notify our editors.

More Newser Stories

Fed Cuts Rate to 0%-0.25%

Target is record low as Reserve battles recession

(AP) - The Federal Reserve today cut its target for a key interest rate to the lowest level on record and pledged to use "all available tools" to combat a severe financial crisis and prolonged recession. The central bank says it reduced the federal funds rate, the interest that banks charge each other, to a range of 0% to 0.25%. More»

Fed Joins 5 Central Banks in Shock Rate Cut

US, EU, UK, others offer 50-point reduction to reverse diving markets

(NEWSER) - The Federal Reserve and five other central banks cut interest rates by 50 basis points in an emergency attempt to stem the economic effects of the credit crisis, reports Bloomberg. The move brings the American benchmark rate to just 1.5%, while the European Central Bank and the monetary authorities of the UK, Canada, Switzerland, and Sweden all joined in the action. China also cut rates by more than a quarter-point. More»

Fed Weighs Emergency Rate Cut

As economy deteriorates, inflation becomes less of a concern

(NEWSER) - Mounting fears that the credit crisis and continually worsening economic data will push a stagnant US economy into a severe recession has spurred the Federal Reserve to consider cutting interest rates from their current 2%, the Wall Street Journal reports. Even if the House follows the Senate in passing the $700 billion bailout, some action is likely. More»

Fed Ponders Pause in Rate Cuts—After 1 More

Experts expect a last cut to 2% before the central bank stops and waits

(NEWSER) - The Federal Reserve may be ready to cool its torrid rate-cutting after a likely .25% percentage point cut at its meeting next week, the Wall Street Journal reports. Futures markets are betting Chairman Ben Bernanke is unlikely to rest just yet, with little change in the month-to-month economic picture, but will pause after that to assess the cuts' effect and avoid stoking inflation. More»

Bernanke: Adjustment Is Mostly Over

But admits economy could contract, possibility of recession

(NEWSER) - Ben Bernanke for the first time acknowledged the possibility of a US recession, but he also voiced optimism that “much” of the adjustment period was over, the Wall Street Journal reports. His testimony before Congress seemed to suggest an end to aggressive stimulus measures—noting that rates had already been cut “substantially” and inflation was still a “source of concern.” More»

NEWS FROM OUR PARTNERS

What is Newser?

Face it: there's too much news. At Newser, we choose the most thought-provoking and entertaining stories from hundreds of US and international sources and reduce them to a headline, picture, and two paragraphs. And we do it 24/7—you can come back morning, noon, night (and in between) for something new that matters. Read less, know more.

Learn more »

Partnering with: Slate

View Newser on the mobile website

Did Fed Freak With Emergency Rate Cut?

Decision smacks of panic—and worse trouble yet to come

OTHER STORIES ON OUR RADAR

Ben Bernanke • Federal Reserve • financial markets • recession • Asian markets • European markets • interest rate cut

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

Fed Cuts Rate to 0%-0.25%

Target is record low as Reserve battles recession

Fed Joins 5 Central Banks in Shock Rate Cut

US, EU, UK, others offer 50-point reduction to reverse diving markets

Fed Weighs Emergency Rate Cut

As economy deteriorates, inflation becomes less of a concern

Fed Ponders Pause in Rate Cuts—After 1 More

Experts expect a last cut to 2% before the central bank stops and waits

Bernanke: Adjustment Is Mostly Over

But admits economy could contract, possibility of recession

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?

Did Fed Freak With Emergency Rate Cut?

Decision smacks of panic—and worse trouble yet to come

Bookmark & Share

OTHER STORIES ON OUR RADAR

Ben Bernanke • Federal Reserve • financial markets • recession • Asian markets • European markets • interest rate cut

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

Fed Cuts Rate to 0%-0.25%

Target is record low as Reserve battles recession

Fed Joins 5 Central Banks in Shock Rate Cut

US, EU, UK, others offer 50-point reduction to reverse diving markets

Fed Weighs Emergency Rate Cut

As economy deteriorates, inflation becomes less of a concern

Fed Ponders Pause in Rate Cuts—After 1 More

Experts expect a last cut to 2% before the central bank stops and waits

Bernanke: Adjustment Is Mostly Over

But admits economy could contract, possibility of recession

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?