Fed Cut Interest Rates .25% Wednesday

In what is likely to be the last rate cut – baring any more financial market blowups – in a while, The Fed cut the federal funds rate another quarter point Wednesday from 2.25% to 2%. The rate 5% as recently as September.

The statement “downside risks to growth remain” was removed from the Fed statement indicating to many analysts that we should start to see signs of recovery and that we are showing fewer signs of a downturn.

“They haven’t closed the door to further cuts, but they’ve shut it part way,” said Mark Zandi, chief economist for Moody’s Economy.com. “They’re saying they believe they’ve done enough.”

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The Fed acknowledges recession possible.

Ben Bernanke

Ben Bernanke, a student of the Great Depression, knows what a depression looks like and previously served on the panel that unofficially determines when a depression begins and ends. On Wednesday, Bernanke acknowledged that the US could be headed for a recession. More after the break.

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Fed cut rates by .75%

The Federal Reserve cut interest rates by .75% in their regularly scheduled meeting on Tuesday, March 18, 2008. Stating that the economic outlook is not good, the Fed indicated that more rate cuts could be on the way.

The short-term rate is now down to 2.25%, down from 5.25% in September. The Dow went down at first, but then rose to an astonishing gain of 420 by the time the markets closed.

Many economists were predicting a full point cut and were surprised with the 3/4 cut.

For the entire article, click the “more” link.

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Fed Ready to Cut Rates Again

Ben Bernanke

With oil prices hitting record highs ($100.88) and the dollar falling to $1.51 for 1 Euro, the Federal Reserve is talking about interest rate cuts again. Many are predicting a .5% cut again with the term stagflation resurfacing in economic conversations.

According to Wikipedia, stagflation is a “term used to describe a period of inflation combined with stagnation (that is, slow economic growth and rising unemployment, possibly including recession). This term first came to be recognized in the 70’s.

Click the “more” link below for the rest of the post and a video.

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Fed ready to cut rates again – Is that what we need?

On Thursday, Ben Bernanke indicated that the Fed was prepared to do whatever necessary to ward off a recession, even if it meant cutting interest rates again. Many economists are speculating a .5% cut, but most anticipate a .25% cut.

I went to the Friday at the Beach Chamber event this morning and the guest speaker was Dr. Rick Harper, Director of UWF’s HAAS Center for Business Research and Economic Development. He was saying that a monetary policy is not what we need right now to spur the economy, we need a fiscal policy. He was saying that interest rate cuts are not what we need, but we need targeted tax cuts to lower and middle income groups, the large part of our consumer spenders.

This makes sense to me (although I am not against interest rate cuts). As a modern consumer, interest rate cuts don’t do me any good. If I refinanced a couple years ago to get money to spend on consumer goods, then my property value went down, and my taxes and insurance went up, how could I benefit from lower interest rates? I can’t refinance again, my property probably wouldn’t appraise, and even if it did, I’m still in debt up to my eyeballs from the last time I refinanced for more money because I couldn’t pay that debt down with my salary raise because that is going towards my raised insurance and tax bill.

Harper was saying that we need a targeted tax cut for the lower and middle income families. The lower and middle income families are the majority consumer spenders. If their bill outtake can be lowered, then they will have more free money to buy consumer goods. If they have more money to buy more consumer goods, then more people have jobs, etc., etc.

I wonder how much of a tax cut we would need to see a large-scale economic effect.

As a side note, I do see how interest rate cuts can benefit the small business. I am employed by a small business, and this is important to me. I am, by no means, against interest rate cuts.

Click here to read the article about Bernanke cutting interest rates in Januray 29, 2008.

Click here for Dr. Harper’s PowerPoint Presentation supporting his discussion at the Beach Chamber’s Friday at the Beach.