Many investors believe the central bank will cut rates by at least another half-percentage point following the end of a two-day meeting on Oct. 29.It was said that the Fed under Alan Greenspan believed that it should ignore bubbles, and just mop up afterword. It is now obvious that the flood requires more mopping than the Fed can handle. Great job, central bankers.
In fact, the fed funds futures on the Chicago Board of Trade are now pricing in a 26% chance that the Fed will cut rates by three-quarters of a percentage point to 0.75% by that meeting.
Fed Chairman Ben Bernanke has said in recent weeks that economic weakness is likely to continue into next year, despite rate cuts and other recent moves taken by the Fed and Treasury Department to try and fix the credit crisis.
On Monday [October, 20], Bernanke pushed Congress to consider a new stimulus plan to spur the economy.
"Everyone at the Fed has pretty much told you they're going to cut," said Rich Yamarone, director of economic research at Argus Research. "They're in a kitchen sink mode right now. Rate cuts, fiscal stimulus, bailouts - they're throwing everything they can at this right now."
Tuesday, October 28, 2008
Government in kitchen sink mode to rescue economy