Fed’s actions may wind up hurting in the long term
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feds, Interest Rate Cut March 18th, 2008Cut and run.
That’s the scenario as the Federal Reserve gathers today to ponder its next move in a financial minefield pockmarked by a struggling economy, a grinding credit crunch and troubling signs of inflation.
Fed Chairman Ben Bernanke and his colleagues, who have caught plenty of grief for failing to recognize sooner the mess we’re in, have been pushing every button within reach in recent months.
They’ve slashed short-term federal funds rates from 5.25 percent to 3 percent since September, including two cuts totaling 1.25 percentage points in a matter of days that gave off the faint whiff of panic. Today, most folks expect the Fed to cut rates at least another half-point, to 2.5 percent.
In theory, at least, all those rate cuts should be filtering through the economy any time now, encouraging struggling households to restructure existing debts at lower rates or luckier folks to borrow new money to pursue their happiness. In theory, lenders would be happy to lend lower-cost money and pocket a tidy profit.
So far, at least, it hasn’t worked out that way. Credit markets have been seizing up all over the place.
Tags: feds, Interest Rate Cut
