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Fed funds rate cut to nearly zero

The U.S. Federal Reserve has fired almost all its interest rate bullets, setting new target interest rates below 1 percent for first time since the 1950s. The big however:

The move, which affects the rate at which banks lend their reserves to one another, was widely expected and to a large degree symbolic. Demand for interbank loans has been so low that the actual Fed funds rate has been far below the target for a month and hovered at barely 0.1 percent in the last several days.

With its move, the central bank implicitly acknowledged that recession is more severe than officials had thought at their last meeting in October.

The main thing that worries me is that we are barely at the beginning of the recession and the Fed is almost out of ammo. We’re in for rough sledding if this cut and the stimulus packages can’t turn things around.

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Tom Mangan posted at 11:41 am December 16th, 2008 |

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