by William Neikirk
Video by Sabrina Fang
The Federal Reserve cut interest rates by a quarter of one percent today, its second straight reduction since a credit crunch threatened severe harm to the economy this summer.
The central bank's decision to reduce its benchmark interest rate to 4.5 percent met financial market expectations. But it came as a government report showed today that the economy posted a strong 3.9 percent growth rate in the third quarter.
The Fed said it acted to prevent a slowing of economic growth in the months head, "partly reflecting the intensification of the housing correction."
It was a strong pre-emptive strike against a future slowing of growth and a possible recession.
It said that the move "should help forestall some of the adverse efects on the broader economy that might otherwise arise from the disruptions in financial markets and promote economic growth over time."
In September, the central bank slashed interest rates by a half of one percent, a strong move to counteract the economic damage from turmoil in financial markets caused by mortgage-backed securities.
Its benchmark rate stands at the lowest since Jan. 31 of 2006.
Also cut by a similar one quarter of one percent was the central bank's discount rate, the rate charged financial institutions for direct borrowing from the Fed.
One member, Thomas Hoenig, dissented from the decision to cut rates. This dissent indicated that future rate cuts may be hard to obtain, and could reflect a growing resistance to interest-rate reductions with inflation remaining a live threat.
In its statement, the Fed's policy making arm, the Federal Open Market Committee, said that "readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation."
At the same time, the committee said that it "judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
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Comments
This will, of course, cause the dollar to fall even futher.
Below is a link to a graph of the US dollar versus the Canadian dollar.
http://quotes.ino.com/chart/?s=FOREX_USDCAD&v=dmax
The only people stupid enough to believe this economy is in good shape are the people still supporting Bush.
Really, the Canadian Dollar is worth more than the US dollar? Really?
Worst President Ever!
Posted by: nisleib | October 31, 2007 2:52 PM
Posted by: nisleib | October 31, 2007 2:52 PM
nisleib,
Any moment now Terry will come on here and complain about how the rich Republican white guys will lose their tax cuts after the Dems win in 08, poor babies, I think it's far past time that we stop borrowing from China to pay for this stupid civil war in Iraq.
Posted by: John E | October 31, 2007 3:14 PM
Really, the Canadian Dollar is worth more than the US dollar? Really?
Posted by: nisleib | October 31, 2007 2:52 PM
Well, it's happened before. I recall that when I was a boy the same thing happened, but your chart doesn't go back that far; maybe your memory doesn't either.
The British pound was $5 and the world didn't end.
Posted by: Dave | October 31, 2007 3:28 PM
It happened 33 years ago, Dave. That is a long time.
Currency traders are loving this economy. They are just raking it in right now. Everyone else... well not so much.
The funny thing: This is making George Soros even richer.
Posted by: nisleib | October 31, 2007 3:53 PM
Gas prices went up 4.15 a barrel today. These are the long lasting effects of the Republican borrowing to pay for today's government and war. Republicans used to be for responsible government but the last six years have proven that they can not be trusted.
Posted by: PD | October 31, 2007 4:01 PM
yay our dollar is shrinking! A yacht in every pot! Republicans are economic magicians.
Posted by: ron oblivious | October 31, 2007 4:36 PM
"Republicans used to be for responsible government'
Rhetorically, I suppose. What they are really for is decoupling taxes from spending, i.e. incurring debt rather than funding the government in today's dollars. This goes back to before Reagan.
There really are basically two choices: tax and spend, or borrow and spend. Clearly, tax and spend is the more responsible policy.
Posted by: Distrust and Verify | October 31, 2007 4:54 PM
Well, we all know how the last "preemptive strike" by this administration turned out.
Wait until oil soars over $100 a barrel (it's closing in), and the Chinese stop financing our debt. Maybe the "world won't come to an end", as Dave says, but it will sure change.
Posted by: dt | October 31, 2007 5:04 PM
This is starting to give me the willies...like...when will the shoes drop?
Posted by: lochnessmonster | October 31, 2007 7:46 PM
MAth Whiz,
Unlike you and (Nislib?), I have a job during the day, so therefore this post will have to wait until the evening.
As far as the taxes that I pay, yes if her thighness or any of the other dwarfs become president, I believe my taxes will increase - just like all the other producers in our society.
Six years into an economic expansion and growth may be slowing? Gee what a shock. Check history prior to 1997 if you can and see how many six year economic expansions have occurred in our history.
P. S. - Math Whiz - I hope you got a good haul trick-or-treating tonight.
Posted by: Terry | October 31, 2007 8:09 PM
Terry, what has been barely reported is that the economy in the third quarter grew just shy of a 4 percent clip, unemployment claims fell last week, income rose in September, while spending rose some but not as much as income. Those numbers indicate an economy that continues to grow.
Posted by: John D | November 1, 2007 9:40 AM
Hey everyone, JohnD and Terry are right!
I have a nice middle class job, and I just got a new plasma TV from WalMart, (made in China) bought a very reliable Hyundai with a monster warranty (made in South Korea), bought the kids Playstations, (made in China)fancy new clothes, (made in Inodonesia), and bought my wife a sweet 3 carat rock (mined in Africa)
My life is awesome! Look at all my purchasing power! I can spend spend spend and life is grand, I can shop till I drop on these great Chinese products, things must be great!
Oh wait...
Whats this credt card statement in my mailbox?
Uh-oh
Posted by: Erick | November 1, 2007 9:55 AM
Erick,
Funny! Send them a handwritten note: "I.O.U." with the credit card statement. LOL
Posted by: Lou | November 1, 2007 10:36 AM
Lou, Erick, why did you buy all those products made elsewhere? And why are so many products being made other than the U.S.? Do you think regulations and other issues pushed by the Left have driven manufacturing jobs overseas?
Also, were manufacturing jobs going overseas during the Clinton administration too? Or do you think this is just a 21st Century, during the Bush administration phenomena?
Also, do you know that most cars sold by Toyota and Nissan anyway (not sure about Hyundai) are MADE in the U.S.?
Also, Erick, if you can't afford the credit card bill, then perhaps you shouldn't have made all those purchases, no???
Posted by: John D | November 1, 2007 11:46 AM
"Do you think regulations and other issues pushed by the Left have driven manufacturing jobs overseas?"
How about trade deals pushed by "the right." Your brain is so childish and simplistic I bet it would explode if for even a second it wavered from the "left bad, right good" paradigm.
Open your eyes, Dyslin. There is a problem and there is plenty of blame to go around.
Posted by: Distrust and Verify | November 1, 2007 11:52 AM
John D,
Well said! If we can't afford it, we shouldn't make all those purchases. Having said that. It should apply to our Govt. as well. The worst case is that we declare bankruptcy. But what about our Govt.? Where do we get the money to pay 1 Trillion dollars of loans?
I guess we have to stop borrowing money from China to fund our Iraq War that we can't afford. Is the Iraq War paid for too? Or are we on loans again?
Posted by: Lou | November 1, 2007 12:07 PM
Of course they lowered rates.
The monied class needs another bunch of suckers to go into debt in order to keep the monied class,,,,monied.
Posted by: C.Morris | November 1, 2007 6:34 PM