Thursday, January 31, 2008
Another Rate Cut!!
We wanted a 0.5% rate cut and we got it.....and the markets still went down. The Dow fell Wednesday 37.47 points to close at 12,442.83. The SPX lost 6.49 points, closing at 1,355.81.
As expected, the Fed announced a cut of 50-basis points on both the Fed funds rate and the discount rate. This puts these rates at 3% and 3.50% respectively. The Fed noted that there remain downside risks in the economy due to a struggling housing market and soft labor market. However, the ADP report Wednesday morning showed a solid gain of 130,000 private sector jobs, which could lift expectations for Friday’s payrolls data.
The Fed hopes that its aggressive move to cut rates will help keep the U.S. economy from falling into a recession. However, they also have to keep a watchful eye on inflation. This morning’s release of fourth-quarter GDP showed a slower than expected rate of 0.6 percent. However, the GDP price index rose 2.6 percent, a tenth above estimates. No one wants to see stagflation and the Fed feels that pricing pressures will slow in the months to come as energy prices ease.
Anyway where does this leave us? We have a big jobs report out Friday. Lets see what that says and then decide what to do.
Until next time.
As expected, the Fed announced a cut of 50-basis points on both the Fed funds rate and the discount rate. This puts these rates at 3% and 3.50% respectively. The Fed noted that there remain downside risks in the economy due to a struggling housing market and soft labor market. However, the ADP report Wednesday morning showed a solid gain of 130,000 private sector jobs, which could lift expectations for Friday’s payrolls data.
The Fed hopes that its aggressive move to cut rates will help keep the U.S. economy from falling into a recession. However, they also have to keep a watchful eye on inflation. This morning’s release of fourth-quarter GDP showed a slower than expected rate of 0.6 percent. However, the GDP price index rose 2.6 percent, a tenth above estimates. No one wants to see stagflation and the Fed feels that pricing pressures will slow in the months to come as energy prices ease.
Anyway where does this leave us? We have a big jobs report out Friday. Lets see what that says and then decide what to do.
Until next time.
# posted by Paul @ 4:20 AM 
