One Reason the Fed cuts Won’t Save the Market

Last month, we saw the Federal Reserve cut the Fed Funds Rate a full 125 basis points (1.25%) to 300. What does that mean historically? In the following article we will take a look at just how dramatic the Fed’s 125 basis cut in 8 days means.

 

 

 

The Fed started issuing “Target Rates” in 1982. Before then, the free market set the prevailing rates. Now, the Fed through the open market works to get the rate to its target. Here is the graph of the Target rates since 1982:

 

Read Full Post »

Fed Cuts Discount Rate to 3.5%

After deciding to cut the Fed Funds Rate to 3.0% on Wednesday, the Federal Reserve bank has slashed the discount rate to 3.5%. While the Fed Funds Rate determines the rate that banks can charge one another for borrowing money, the discount rate controls what the banks get charged after directly borrowing from the Fed.

Fed’s Press Release:

http://www.federalreserve.gov/newsevents/press/monetary/20080131a.htm

Read Full Post »