The FOMC’s statement regarding the reduction was as follows: “The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets. The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully. Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.” Only William Poole dissented, since he believed policy action was not justified before the regularly scheduled meeting next week.
Federal Reserve Slashes Interest Rates 3/4 of a Point
Posted in * Economics, Politics, Economy
Sounds like the Fed believes we’re probably heading into a severe recession.
Irenaeus,
I don’t think that’s what they are saying. Mr. Bernanke stated early this month that he sees and economic slow down and not recession in the strict sense. Recession is usually defined as a shrinking GDP in two consecutive quarters. This might better be called a market contraction and correction- both in stock and real estate.
I’m concerned about the National Debt and the lack of real leadership from congress or our president or the potential candidates in next years election. With out real visionary leadership- we may very well be in trouble.
Also it was just in 2003 that the Fed Rate was at 1%- so we have a ways to go for economic stimulus.