Has the Fed Already Lowered Interest Rates?

Financial Planning - Financial planning in general. (Moderated) 

  Yahoo!   Google   Windows Live   del.icio.us   digg   Netscape

Subject Author Date Has the Fed Already Lowered Interest Rates? money.sage.com 08-16-2007  Re: Has the Fed Already Lowered Interest Rates? Beliavsky 08-16-2007  Re: Has the Fed Already Lowered Interest Rates? bondguy1824 08-16-2007  Re: Has the Fed Already Lowered Interest Rates? rick++ 08-16-2007  Re: Has the Fed Already Lowered Interest Rates? wyu 08-16-2007  Re: Has the Fed Already Lowered Interest Rates? xhoster 08-17-2007
Posted by on August 16, 2007, 8:06 am Has the Fed Already Lowered Interest Rates? http://money-sage.com We note straws in the wind which indicate that the Fed may already have lowered interest rates. While there has been no official announcement, we note with keen interest that yesterday afternoon Fed funds traded at 4.62%, more than half a point BELOW the official funds target rate of 5.25% In addition, the yield on the 30 day T-bill is now trading more than 1 full point BELOW the official funds rate. The Fed has complete control over the overnight rate. In fact, Fed funds is the one rate it does absolutely control. Late last week, when banks panicked and drove the funds rate up to 6%, the Fed intervened IMMEDIATELY, driving it back down to the official 5.25% rate. If the funds rate does not return to 5.25% today, we will infer that the Fed HAS ACTUALLY CUT RATES, AND BY A SIGNIFICANT AMOUNT (quarter point moves are typical; half point moves are somewhat unusual, except in serious situations). It is also extremely difficult for the Fed to hold the Funds rate a full point above the 30-day rate. Nor is there any reason they should wish to do so, since the signal the bond market is giving is now UNMISTAKABLE to even the most wilfully OBTUSE AT THE FED. The bond market is ordering the FED to cut, cut, cut. Posted by Beliavsky on August 16, 2007, 8:23 am On Aug 16, 8:06 am, money.sage....@gmail.com wrote: > Has the Fed Already Lowered Interest Rates? > > http://money-sage.com > > We note straws in the wind which indicate that the Fed may already > have lowered interest rates. While there has been no official > announcement, we note with keen interest that yesterday afternoon Fed > funds traded at 4.62%, more than half a point BELOW the official funds > target rate of 5.25%. Since 1994, the Federal Reserve has always announced changes in target Fed Funds, usually at scheduled meetings of the FOMC and in emergencies between meeting. I am sure that if the Fed were to change its operating procedure, it would say so. Ben Bernanke, the current Fed chief, has long advocated central bank transparency. Posted by bondguy1824 on August 16, 2007, 9:49 am > On Aug 16, 8:06 am, money.sage....@gmail.com wrote: > > > Has the Fed Already Lowered Interest Rates? > While Fed Funds and Bills are ratcheting lower, any short-term rates with a whiff of credit risk have skyrocketed (take a look at CP). For now, this is a technical move to keep things moving, but if the Fed wants to ease, they'll let you know. It may come to that. Wait and see what happens when a lot of these levered trades unwind, including the infamous Yen carry trade (take a look at the JPY over the past few days). As of this writing, the stock market hasn't even reached the official definition of a correction (we may get there today). Historically, this is the slowest time of the year. Most of the big market players are on vacation. It will get slower over the next two weeks. If the markets don't normalize (meaning imbalances smooth out, not lower volatility) you get an ease at the September meeting (probably 50bp) Posted by rick++ on August 16, 2007, 9:48 am The loan market can trump the Fed by setting its own rates. Sadly the Fed is incrediably out of step with the market this month and causing tremendous financial damage. Posted by on August 16, 2007, 11:42 am > The loan market can trump the Fed by setting its own rates. > Sadly the Fed is incrediably out of step with the market this > month and causing tremendous financial damage. I'd say the tremendous financial damange was caused by the financial instituations and the fed is telling them they have to take their medicine this time. Now it hurts that the innocent will be knocked down along with the guilty -- but I'd say the guilty needs to get hit badly in order to keep excesses like this from happening again soon. Otherwise, what's the moral of the story? Do anything you want to get ahead -- you'll get bailed out. Similar Threads Posted How hedge interest rates? April 6, 2008, 9:15 am Finding the best savings interest rates May 27, 2007, 8:14 am FED will continue to drop interest rates August 20, 2007, 8:43 am How to capture higher global interest rates November 25, 2006, 10:36 am Historical data for interest rates given by money market funds? October 18, 2008, 8:25 am Compare tax deductable interest rate to non-deductable interest rate March 5, 2007, 12:45 pm Interest tax deductions April 28, 2008, 10:52 am Should I care when CDs pay interest? October 7, 2008, 6:57 am LOOK ME:) - question about banks, interest % :) November 12, 2006, 3:44 pm Low interest credit card December 12, 2006, 10:23 am