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USA: Fed pulls all the plugs
Wed, Dec 17 2008, 09:17 GMT
by Peter Possing Andersen, Signe Roed-Frederiksen
Overview: The Fed went all the way yesterday night with the Federal Open Market Committee (FOMC) de-ciding to lower the fed funds rate from 1.00% to between 0% and 0.25%. The Fed’s decision to target a range for the fed funds rate probably reflects difficulties experienced by the central bank in maintaining the actual rate close to its target at the same time as the monetary base is exploding. We expected such a move with economic data in recent weeks dreadful, inflation falling fast and the Fed having already shown its willingness to act aggressively. However, with markets only discounting a 12% probability of a cut to below 25bp the decision fuelled a rally in treasuries and further flattening of the curve while equi-ties also rallied significantly.
Published on Wed, Dec 17 2008, 09:19 GMT
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