The Fed’s statement to the effect that “Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets,” implies that perhaps the worst may be yet to come. But the markets weren’t reading it that way after the announcement of a 50 basis point cut in the Fed’s Fed Funds target. As I have pointed out repeatedly over the past few months, the cut was really only ¼ point, since they had held the effective Fed Funds rate at 5% for most of the past 5 weeks. Today the Fed drained $7 billion net from the system putting the rate on the repos around 5%. The subsequent lowering of the Funds target suggests that the Fed wants to try to start growing the SOMA again, after keeping it flat for 9 months. Click here to download complete report in pdf format (Professional Edition Subscribers).Try the Professional Edition risk free for thirty days. If, within that time you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.
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