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Fed Will Cut Rates
So far, I am in the camp that thinks much of the Wall Street whining and criticsim of Ben Bernanke this past month is misplaced. The Fed has been straightforward in its actions. The Fed stepped up--along with other central banks--and made sure that the global credit squeeze didn't turn into a financial collapse. Many hedge funds and lenders have lost money or gone out of business.
Now, with today's employment report--a decline of 4,000 plus revising down previous months--the Fed will begin a round of benchmark rate cuts at its Septemebr 18 Federal Market Open Committee meeting. The combination of declining home prices and falling employment is worrisome.
Its clear by now that the Feds will cut rates today. Question is "by how much?" Its a toss-off between 25bps and 50bps. While the markets were hoping for a 50bps, the reality is leaning more towards the 25bps mark. Also is this the beginning of a series of rate cuts? While the credit woes continue to rock the market, there are the inflationary pressures to consider with a barrel of oil back to its all time highs of over $81 a barrel. It will be a delicate balancing act for the Feds - we'll see.
