Fed Moving toward Unthinkable Territory

EmploymentCrossing.com The Federal Reserve is highly expected to cut interest rates again October 29, 2008. But could the Fed soon go where it has never gone before, and bring them down below 1%? On October 8, 2008 the Fed lowered its federal funds rate, the benchmark overnight lending rate at which banks lend to one another, by a half-percentage point to 1.5%. Speculators believe the central bank will cut rates again by at least another half-percentage at the end of a meeting on October 29. “Everyone at the Fed has pretty much told you they’re going to cut,” said Rich Yamarone, director of economic research at Argus Research. “…they’re throwing everything they can at this right now.” Fed Chairman, Ben Bernanke has revealed in recent weeks that economic turmoil is likely to continue into 2009, despite the rate cuts and other efforts taken by the Fed and Treasury Department to try and mend the credit crisis. Some economists argue that another rate cut many be the least important step the Fed can take in its effort to solve the crisis. “It’ window dressing, only a psychological weapon,” said Sung Won Sohn, economics professor at Cal State University Channel Islands. “Right now, the problem isn’t the cost of the Fed’s money; it’s that the existing money supply is not circulating.” Many economists say that fear and uncertainty in the markets is so great right now that the Fed can’t risk leaving rates unchanged, and that anything that can be done to spur lending is a good thing.

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Google Video | October 26, 2008

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