Monday, August 20, 2007
What Is Going On?
At about 8.30am EST last Friday the markets were looking at another dire day.
Then the Fed rode to the rescue by announcing that it was going to cut the discount rate (the rate the Fed lends to the banks) by 0.5% to 5.75%. This did enough to stop the rot and all the markets saw strong rises Friday; the Dow ended the session with a gain of 233.30 points to 13,079.08. The SPX added 34.67 points to close at 1,445.94.
Why did the Fed do this? Who knows? Only 10 days ago the Fed was saying how inflation was their main policy concern. Now that seems to have gone out of the window in favour of protecting vulnerable economic growth. From what seemed like the next rate rise might be up, it now looks like the next rate move will be down!
Will the Fed's actions be enough to stop the rot. I doubt it but lets see what happens this week.
Then the Fed rode to the rescue by announcing that it was going to cut the discount rate (the rate the Fed lends to the banks) by 0.5% to 5.75%. This did enough to stop the rot and all the markets saw strong rises Friday; the Dow ended the session with a gain of 233.30 points to 13,079.08. The SPX added 34.67 points to close at 1,445.94.
Why did the Fed do this? Who knows? Only 10 days ago the Fed was saying how inflation was their main policy concern. Now that seems to have gone out of the window in favour of protecting vulnerable economic growth. From what seemed like the next rate rise might be up, it now looks like the next rate move will be down!
Will the Fed's actions be enough to stop the rot. I doubt it but lets see what happens this week.
# posted by Paul @ 3:08 AM 
