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FOMC September Meeting — Workout Continues
Tue, Sep 16 2008, 07:47 GMT
by John Silvia
We Expect the Fed to Leave the Fed Funds Rate Alone
We do not expect the Fed to lower the federal funds rate at tomorrow’s Federal Open Market Committee meeting. At this time the Fed appears more willing to address the current credit and economic difficulties through an expanded discount window and credit facilities rather than a cut in interest rates. In October the Fed may cut the funds rate, but for now we expect the Fed to stay on hold. Financial markets continue to adjust to an environment of sub-par growth and the imbalance of asset prices and valuations looking forward compared to the past. The past was a period of rapid gains in consumer incomes and home prices. The future is far less rosy, and the adjustment period in between is difficult. Meanwhile, persistent inflation limits the willingness of the Federal Reserve to respond to economic weakness by lowering the federal funds rate.
Published on Tue, Sep 16 2008, 07:50 GMT
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