Fed Lowers Rate to 3% as Six-Year U.S. Expansion Falters

[swag]

Source: Bloomberg

Jan. 30 (Bloomberg) -- The Federal Reserve lowered its benchmark interest rate by half a percentage point to 3 percent, the second cut in as many weeks, to prevent the U.S. economy from sinking into a recession.

``Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity,'' the Federal Open Market Committee said in a statement after meeting today in Washington. ``However, downside risks to growth remain.''

The move, coupled with the Jan. 22 emergency cut of three- quarters of a point, is the fastest easing of monetary policy since 1990. Hours before the decision was announced, the Commerce Department reported that gross domestic product grew 0.6 percent in the fourth quarter, half the pace forecast by economists.

``Financial markets remain under considerable stress, and credit has tightened further for some businesses and households,'' the Fed said today. ``Recent information indicates a deepening of the housing contraction as well as some softening in labor markets.''



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=an_yk2IHMtjw&refer=home

[ReformedChris]

1. Rich Keep Getting Richer..

Ever since Volcker the Fedhas played games with the economy to suit the very elite of America. I think this is just a continous gasping for air in a situation where this economy will continue to drown under our Reaganomics principles.

[sabbat hunter]

8. actually volker

did what he had to do to get inflation under control. He knew his policies would cause a recession, but it was better than risking hyper inflation like in Argentina, Israel and other countries had at the time.

[RUMMYisFROSTED]

29. "Ever since Volcker..." Bzzzt.

"Ever since the Fed..." Ding. ding, ding.

[ReformedChris]

2. Rich Keep Getting Richer..

Ever since Volcker the Fedhas played games with the economy to suit the very elite of America. I think this is just a continous gasping for air in a situation where this economy will continue to drown under our Reaganomics principles.

[bill]

3. What 6-year expansion?

The economy has basically been in a holding pattern for the last 6 years.

[lonestarnot]

18. Yeah wtf is that?

6 year expansion of slave labor and top 1% drain.

[radfringe]

20. you must have missed it

I think it was somewhere winning the war in Iraq and wanting more money to win the war in Iraq..

[guitar man]

22. the 6 year expansion

...of the wallets of the top .1% and their cronies while the rest of us take it in the ass :(

[shireen]

4. does anyone know how long the rates will stay this low?

i finally put away a little money into a money market savings account, and I've been watching the interest rate fall from 5% to 4.4% to 4.1%, and now it's going to probably be 2.8% or less. Should have put it in a long-term CD.

So the moral of the story is that if you stay out of debt and save, you're screwed.

BTW, who is benefiting from these low interest rates?

[spinbaby]

6. Presumably people with adjustable rate mortgages

I think the theory is that people with adjustable rate mortgages will get a break because their rates will adjust down.

[wysimdnwyg]

12. The theory, as I understand it...

is that the lower rates will make banks more likely to borrow. It is supposed to also prompt banks to lower their own lending rates. This latter makes it more appealing for everyone else (heretofore known as "people") to borrow money via car and housing loans. This creates more spending, thus helping the economy to rebound. Lower rates from banks also prompts companies to borrow more, then turn around and invest that money into new projects and more hiring. This would, obviously, also help the economy to rebound.

But then, I am far from an expert on economics.

[radfringe]

21. until after the election in November

[Betsy Ross]

23. I agree

I've been getting around 4% as well on savings, but I get a whopping 1% on my checking account! Well our president did say we should go shopping; he never said put money in savings.

[TheFarseer]

28. I have no idea

rates get cut and the market is down :shrug: Can't they figure out that this isn't working? Who in the world thinks we just don't have enough debt and if we just borrowed some more money everything would be allright? They might have to actually re-think our insane economic policies instead of doing all this half-ass bull sh*t. To me, all we are doing is stalling until a Democrat is in office so they can blame it on them.

[Robbien]

5. Wall Streeter spoiled brats got what they were demanding

In their next breath they will be demanding "Give Me More. Who cares about inflation, only working stiffs are effected by that. Give us another rate cut, and make it bigger this time."

[sabbat hunter]

11. what could be worse

inflation or a recession?

The idea is to avoid a recession.

[Robbien]

14. Depends on what side of the devide one sits

A recession in our current world means stock market prices drop. The elite have a few less dollars in their trust accounts.

Inflation means fewer tables across America will have any food on it at dinner time.

Lowering interest rates do nothing to help out GDP or job growth because it does nothing to solve the credit/liquidity crunch.

[denverbill]

15. It depends on the inflation. If it's 4,5,6% for a few years, no big deal.

Hyperinflation as in Germany in the 30's and South America more recently is another story. Ask any retired person living on a fixed income how long their money would last with 100% or 1000% inflation. A major depression still only lasts a few years. Hyperinflation wipes out peoples life savings.

[sabbat hunter]

16. 4,5,6% no big deal?

how much was your raise last year? or the year before?

even at 5,6% inflation that outpaces most people's raises.

[DS1]

19. 5%

sure felt like a drop in the ocean at my rate.

[high density]

25. This is not good

The Fed acts as if they'll go into negative rates to keep the stock market afloat. It's just not right.

[whistle]

7. Wow, you mean Bush's stimulus package is really not working?

:sarcasm: Please tell me how Americans with their credit in the toilet can take advantage of lower interest rates or can even get credit. There are tens of millions of such American homeowners and small business owners who are maxed out on credit and are about to be foreclosed on. All these interest rate reductions do is bail out the hedge fund investors and give investment speculators more leverage to raid, loot and pillage all across the country. Meanwhile financially stressed Americans are put at greater and greater risk from hyper-inflationary forces now set in motion by these monetary policies. We need Hillary's Homeowner and Bank Foreclosure Protection legislation put into place before further damage is done to the economy.

[hatrack]

9. Good thing this won't have any effect on inflation, huh?

:eyes:

[Doctor_J]

10. "expansion falters": recession has hit the upper class too

newsspeak

[MercutioATC]

13. Inflation's gonna get ugly.

Time to buy bonds and precious metals.

[Javaman]

17. 6 months from now...

While I strolled down the isle of my local food dispensing station, I noticed that top ramon was going for 1 for 5 dollars. "Odd", I thought, shouldn't that be the other way around?

"oh well", I shrugged and chalked it up to a pricing error.

[Zorra]

24. Welp...that should give people confidence in the economic health of the US.

Not.

Yikes!

[TheFarseer]

26. Thanks, Assholes

Now I might as well bury my money in the backyard. CD rates are going to be under 3% and I'm sure as hell not sticking any more money in the stock market.

[tabasco]

27. I'm sure the MBA President will have the economy booming in no time.

He's got an MBA so he has to be an economic genius, right?

[onehandle]

30. Kiss your asses and your 401Ks goodbye. nt

[eppur_se_muova]

31. Interest rates have now been cut five times since 18 September 2007...

US rates cut to avoid recession (BBC)

Interest rates have now been cut five times since 18 September 2007, when the Fed first lowered rates in response to the credit crisis.
***
The last two such emergency cuts were on 17 September 2001, shortly after the attacks of 11 September, and on 3 January 2001, in the wake of the dotcom bust.

The last time the Fed cut rates by as much as three-quarters of a percentage point was in August 1982, almost 26 years ago.
***
more: http://news.bbc.co.uk/2/hi/business/7218055.stm

"since 1982" ... who was in office then? Another monetary mastermind?

[ozone_man]

32. Running out of bullets.

Two more points to go and they're out of ammo. Fasten your seat belts, it's going to be along ride down from here.

[NickB79]

33. Christ, I gotta grow a bigger garden

And buy that chest freezer before inflation jacks up the price.

Looks like I'm gonna be eating a lot of vegetable stew this year.

[Buns_of_Fire]

34. "SOME softening in labor markets."

These guys would be funny, if we weren't all afraid to laugh.