Everyone and their brother and sister on Wall Street and CNBC thinks that the Federal Reserve should cut interest rates yesterday. The problem is that the Fed doesn't seem to agree with that view.
Data released in the Beige Book regarding economic conditions around the country said that the credit crunch had a "limited" impact on the economy where "activity has continued to expand." Many investors read that to mean that there is no rush for a rate cut and sent the Dow Jones industrial average down more than 171 points last I checked.
Bloomberg News noted that, "The report suggests that the housing recession and global financial-market turbulence stemming from U.S. subprime-mortgage defaults has yet to have broader effects on the world's largest economy."
It seems like the Fed is trying to wean investors from expecting it to ride to the rescue with interest rate cuts whenever things go wrong. The Wall Street Journal (subscription required) argues that while a Fed rate cut may still come in two weeks, "officials may not see the same need for aggressive easing that financial markets expect."
This sounds like investors may be getting some tough love for Bernanke which though unpleasant for now may be the best thing in the long run.
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Reader Comments (Page 1 of 1)
9-05-2007 @ 5:14PM
hal c said...
I agree that the Fed should not be in the business of making sure investors or any other special interest group don't take a hit but this is a different matter.
If the Fed does not rescue the enormous number of people who can not qualify to refi their houses at current rates the entire economy will sink and the consumer driven economy will be a thing of the past.
We are definitely in uncharted waters here!
9-06-2007 @ 3:34PM
williams said...
I feel the feds should raise the rates they have been too low too long.
We paid 7% interest 34 years ago on our first home. The banks & consumers made poor judgement calls on for housing.
9-09-2007 @ 11:08AM
Harry said...
Gamblers in housing and real estate have been almost begging for some tough love. Looks like they are going to get it.