Fed Cuts Deep On Blue Tuesday

The latest effort to resuscitate a near comatose economy suffering from a housing market hangover, finds the Feds pushing interest rates down again, this time with one of the deepest cuts in Fed history.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - The Federal Reserve reduced its benchmark federal funds interest rate by three-quarters of a percentage point on Tuesday, to 2.25 percent, one of the deepest single cuts in Fed history, but less than investors hoped for.

Why?

Not adverse to more cuts, the Fed said, "Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters."

Some believe the nation's economy is already in a recession, but that won't be official until after two quarters of negative growth.

The Fed has reduced the federal funds rate, six times since September -- twice in January alone.

The Fed also cut by the same 75-basis-points, the discount rate leaving at 2.5 percent.

"Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability," the Fed reported.

There remains frustration that Fed actions, including pumping billions of dollars into an anemic economy, has done little to rescue the housing sector from its deepening coma.

Even as the economy sleeps, the dollar is weaker than ever and inflation moves ahead, spurred largely by record oil prices and more expensive food.

How does this impact you?

See: Bankrate.com's Fed Watch.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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