Do you feel that fed now regrets not having cut fed funds rate in last meeting? They mite even cut it by as much as 75 or 100 basis points if TED spread continues to spike up like that … strong -ve for $ in short-term …no?
I think lowering the fed fund rate will have not affect on the current situation. Banks will not start lending each other more just because the rate is lower. They just dont trust each other due to lack of credit. Fed should leave the fed fund rate unchanged but increase open market ops like repos etc. Fed Chairman should worry more about its fed stmt and pace his words when he speaks rather then cut/increase rates. Looks like he lost a lot of credibility now.
There was too much cutting in order to prop up the stock market and in the end it still is near 11,000. All Bernanke did was deflate the dollar and now he’s out of working room. If the fed rate were closer to 3.0 right now he could cut. But he did too much cutting at the beginning of the year.
Agreed that this won’t solve the problem, just ease the things a bit - esp nothing seems to be happening with bailout. Rates were as low as 1.00 % during last recession … he still has some room to cut. So may be some emergency rate cut could be on cards.
Would have been the consequence on Inflation which the FED is most concerned about? and which at the time was going up. What would have been the impact on the us currency? What would have been the consequnces on the price of oil? What would have been the reaction on the stock market, knowing money market would have much more interesting? Would that have helped to halt the mortgage crisis, would people be able to catch up on their default payments? I don’t feel like they made a bad decision at the time.