The Federal Open Markets Committee (FOMC) made an intra-meeting announcement cutting the Federal Funds Rate Target 75 basis points to 3 ½% and a similar cut in the Discount Rate to 4%. The FOMC justified the move because "broader financial markets have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."

In a separate move, the Canadian Central Bank also announced a rate cut as well.

This emergency move was made ahead of a FOMC meeting next week and after global markets around the world tumbled during the Martin Luther King Day holiday when U.S. markets were closed.

I believe that this move was made to re-establish the idea of the Fed as the lender of last result: the Bernanke Put. Initially, the Fed was reluctant to cut rates for several reasons:

• It was viewed as bailing out the stock market, not the economy;
• There were inflationary pressures from rising all prices;
• U.S. exports largely resulting from a falling dollar seem to be cushioning any drop in the economy.

The Minutes of the September 18 Federal Open Market Committee (FOMC) meeting were released today at 2 PM ET. Because of the 50 basis point reduction in the Federal Funds rate that many on Wall Street (myself included) did not expect at the time, there was more anxiety than usual surrounding the release of this report.

Yesterday, the market ended the day for most indexes on the downside, although only mildly so and on low volume because of the Monday holiday. The markets were also off slightly, prior to the release of the minutes. A rally began shortly after the release of the report. The big question is why?

On one side of the equation, the Fed gave no indication that this was only the first in a series of rate cuts. It actually appeared that the cut was more a form of insurance to "forestall" the potential effects of the housing crisis on the broader economy. This indicates that there may not be any additional rate cuts in the near future.