Too late for the Fed to go back now

The Federal Reserve Bank building in Washington, D.C.

TEXT OF STORY

Scott Jagow: The big question this week is: Will the Fed cut its key interest rate again? Last week's surprise cut was a big one: three-quarters of a percent. But Wall Street is pretty much counting on more. Here's Bob Moon.


Bob Moon: So we're back to this: Wall Street is betting on 25 basis points -- a quarter-percent rate cut. No, some say a more aggressive three-quarters of a percent -- 75 more basis points.

Wait: Given questions about whether last week's abrupt move was even necessary -- and maybe even inflationary -- it's increasingly possible the Fed could pull back and do nothing on Wednesday. You can find economists who will tell you any of those options is possible.

But what's clear is reversing the message the Fed sent Wall Street last week would be about as tough as trying to take back an e-mail after you've already hit the send button.

Lou Crandall is chief economist at the independent research firm Wrightson ICAP:

Lou Crandall: Really the important thing here is they shifted direction. They've moved from a very gradualist approach to a very aggressive approach. And in the long run, six months from now, whether the rates are lowered by 75 basis points or 100, doesn't make that much difference right now. What's important is the change in tone.

The only thing that might change that is trying to unsend the message. Some market strategists warn no rate cut at all could send stocks into another downward spiral.

In Los Angeles, I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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