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The Fed cut interest rates to 2.25%, a nice 75 basis points whack to try to fend off long-lasting effects of a recession and another round of the credit freeze. The question stars to become - does the Fed have enough ammo (or the right kind of ammo)? And I think the answer has been well addressed across the blogosphere, and that answer is “No.”
From Market Watch on the Fed Rate Cut:
The Fed action takes the federal funds rate target down to 2.25%, the lowest since December 2004
The Fed said the size of the rate cut was enough to promote growth.
“Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity,” the Fed said.
Former Fed officials are increasingly calling for Congress and the Bush Administration to do more to help the economy, especially by assisting homeowners struggling to stay in their homes.
The government may also have to take steps to provide more capital to the banking system. The Fed’s actions are essentially temporary.
FYI, Citi, Cwide, and GMAC all paying close to. 65 rebate on a 5.5% 30-year Fixed before the announcement. Afterwards? Cost of a .25.
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