Federal Reserve acts decisively in lowering rates
The Federal Reserve board led by Ben Bernanke took decisive action today in lowering the Fed Funds rate by a half point and additionally, lowered the discount rate as well by another half point. Expectations for a rate cut did not anticipate this aggressive of action by the Fed and the stock market surged higher instantly with the Dow is currently trading up over 250 points as of 3PM Eastern Time.
"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 and to promote moderate growth over time" the statement from the Federal Open Market Committee said. "Developments in financial markets since the committee's last regular meeting have increased the uncertainty surrounding the economic outlook ... and ...tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth."
The Fed, with Ben Bernanke facing his most difficult crisis since taking over as Chairman from Alan Greenspan took stronger than expected action to stem the liquidity crisis and global credit crunch. While real estate will not turn around immediately and mortgage lending will not revert to previous loose standards that got us into these problems in the first place, the immediate impact of today's rate decision will be a moderating of the fear that has pervaded the markets and the country in recent weeks and months.