Back to the future
The WSJ reports that interest rates have gone back to the future, further and faster than anyone would have expected as late as Monday of last week:
The Fed lowered its short-term interest rate target 0.5 percentage points to 3%, and left the door open to more: the statement accompanying the move said “downside risks to growth remain” and the Fed would “act in a timely manner as needed to address those risks.” Investors expect the Fed to cut the rate to 2.75% in March. (Read the full statement.)…Markets see the Fed funds rate falling as low as 2.25% by year-end. While Mr. Bernanke has been accused by some of being slow to respond to the economy’s weakness, his cumulative cuts, at 2.25 percentage points, now tie with those of 2001 as the most in so short a period in two decades…
The Fed has finally gotten the message, it would seem. The economic disruption from last year has mostly been in the world of finance as opposed to the world of the real economy — but a world that depends on the free flow of credit and equity will cease to function if the financial sector freezes up, which has been the danger all along.
January 30th, 2008 at 8:14 pm
Just what message has he gotten? That the cure for the evils of free money is more free money?
If the rates get that low, I’m borrowing every dime I can, converting it to Euros, putting it in a German savings account, and pocketing the interest difference.
January 31st, 2008 at 3:29 am
Well, I guess Bernanke has finally gotten past his fear of inflation. It took a while, but there may be more than fiscal or economic demons lurking out there. I do so hope he’s quicker on the uptick. Unenviable jobs like his are not enjoyable, and we should be charitable.