Federal Reserve cuts rates to 1.25% [Half Point Cut, Not The Quarter Point Expected]

CBS Marketwatch ^

[Nuke'm Glowing]

I call that the Brass Ring for W. Now we can get this economy moving. Let's get capital gains tax cuts now and make this country the economic model for the entire capitalist world!!!!

[palmer]

Probably will cause the market to go up for an hour or two - not much bang for the buck.

[dirtboy]

I don't know how much good this will do. The Fed is currently structured to fight inflation - but IMO we are in a deflationary cycle - and rate cuts in such a cycle are akin to attempting to push a rope.

[dakine]

Dang, and I just re-financed at 5 1/2%....

[TheLion]

Was waiting for this to be posted. Did you see the markets reverse course. Democrats are probably out of the market in mass...boy will this add to the tears! This rate cut couldn't have come at a better time...building on the gains from the last few weeks.

[Willie Green]

At the Sept. 24 meeting, two of the 12 FOMC members -- Gov. Edward Gramlich and Dallas Fed President Robert McTeer -- voted in favor of an immediate rate cut.

Desperation move by the Fed.
We're headed into a deflationary period, just like Japan.

''If we all join hands together and buy a new SUV, everything will be OK,''

Robert McTeer, President, Federal Reserve Bank of Dallas.

[Lurking2Long]

Sure, Willie, sure.

[Abigail Adams]

There goes my money market account...

[Lyford]

Well, I think we can thank Walter Mondale for this. After all, didn't he make the lowering of interest rates the centerpiece of his campaign?

[fm1]

This rate cut and the GOP control of the Senate should bring some much-needed optimism to the markets.

[Willie Green]

Sure, Willie, sure.

Whistling past the graveyard.

Morgan Stanley: Deflation Risk High
THE ECONOMIST: Of debt, deflation and denial
Deflation in a Debt Based Economy

[DandG13]

I won't hold my breath but maybe people will now wake up and see there really are some serious problems that have been brewing. Type all day long the health consequences which are resulting from loss of health care ins, loss of employment, anxiety due to debt which cannot be brought under control (especially without income coming in and loss of all savings in whatever forms it was invested). The next 60 days are going to be a Christmas season that once again the media nor the government has prepared anyone for. I'm tired of feeling sorry for people that didn't see this coming, all the signs have been quite evident for quite a good long time now -- way too much personal debt.

[Wyatt's Torch]

Not exactly...

[OldFriend]

If I am not mistaken, money market managers invest in equities........which would be a good thing, no?

[VRWC_minion]

Did the fed wait until after the election to spur the economy to make it harder for Bush ?

[Doctor Stochastic]

The DJI seems to have dropped about 80 points after the cut. Probably not related unless there's suspicion (as suggested by varioius Radio Stock Analysists) that the FED is really worried.

[Doctor Stochastic]

Bounced back about 25 during posting. I'll go with "unrelated."

[palmer]

There's definitely been an overextended rally, October was the biggest monthly increase since Jan 87. That rally may burn off into new lows before the end of the year. Or it may catch its breath and keep going up. But I don't believe it's more than a bear market rally because the market excesses of the 90's have not been fully corrected.

[Southack]

"We're headed into a deflationary period, just like Japan."

No, not at all like Japan.

The problem with Japan's deflation is that it is slowing down their speed of money.

Deflation itself is a good thing. It means that your Dollar buys more. That's why people go to sales, so that they can get more for their Dollar. That's why some people buy used cars, again because they want their Dollar to buy more. That's deflation. It means that things cost less (like computers and cell phones and long distance).

So long as the speed of money doesn't slow down, deflation is a great thing. Everyone wants to be able to buy more with their money, after all.

But what we have to be careful of is to avoid slowing down the speed of money. So long as people are buying houses and cars and Christmas presents and such, then deflation makes us all richer, but if we start hoarding our money then the economy slows down and we become like Japan.

For now, however, Americans are still spending, so we are nowhere near anything like Japan.