Shorter Fed Statement:
Cut 1/4 point federal funds rate
Cut 1/4 point discount rate
Growth slowing, inflation risks remain
Mr. Market no-likey the no-happy talk . . . Dow off 175 275 as I type this
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Complete Fed statement after the jump . . .
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Release Date: December 11, 2007
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent.
Incoming information suggests that economic growth is slowing,
reflecting the intensification of the housing correction and some
softening in business and consumer spending. Moreover, strains in
financial markets have increased in recent weeks. Today’s action,
combined with the policy actions taken earlier, should help promote
moderate growth over time.Readings on core inflation have improved modestly this year, but
elevated energy and commodity prices, among other factors, may put
upward pressure on inflation. In this context, the Committee judges
that some inflation risks remain, and it will continue to monitor
inflation developments carefully.Recent developments, including the deterioration in financial market
conditions, have increased the uncertainty surrounding the outlook for
economic growth and inflation. The Committee will continue to assess
the effects of financial and other developments on economic prospects
and will act as needed to foster price stability and sustainable
economic growth.Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas
M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin;
William Poole; and Kevin M. Warsh. Voting against was Eric S.
Rosengren, who preferred to lower the target for the federal funds rate
by 50 basis points at this meeting.In a related action, the Board of Governors unanimously approved a
25-basis-point decrease in the discount rate to 4-3/4 percent. In
taking this action, the Board approved the requests submitted by the
Boards of Directors of the Federal Reserve Banks of New York,
Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.
They should have cut the discount window….
Should I say “They GET IT!!!, They Know SOMETHING!”
They should have never started cutting in the first place. Cutting rates hasn’t done much. They are trying to throw money at a situation that was already caused by the same actions. It’s not like lending standards will all of a sudden revert back to the loose prostitute they were not too long ago.
It really makes you wonder if all these people who follow and participate in the markets, whether they’ve ever had an economics class? A RECESSION is a *NORMAL* part of the *BUSINESS CYCLE*.
they’ll save it somehow…….you know something is going to stick save this….
It took four minutes to fill a market order…
Totally unacceptable and just shows that the brokers are FOS….
nevermind that this is most likely the most telegraphed fed decision and it’s my fault that Scwhab can’t anticipate that???
Total Amateurs….
Ciao
MS
If it wasn’t for that meddling inflation they would have gotten away with it.
at least the Fed acnowledged inflation if the big end of Wall Street doesn’t after all didn’t that used to be one of the cornerstones of its charter
plus the previous post on the Libor gap has been staring us in the face for weeks now
many many mortgages domestic and commercial are tied to this rate
if the major banks won’t lend to each other what will do to the rest of us (as I said a few weeks ago)
rgds pcm
I think the call on the LIBOR was right on. Their hands are tied….
The Fed cut the fed funds 25 bps as expected but unexpectedly cut the discount rate only 25 bps, thus keeping the penalty rate at 50 bps. On the economy, they cited slower consumer spending and the intensification of the housing correction and the strains in the financial markets exacerbating the slowdown. On inflation, the commentary was about identical to the wording in the Oct statement saying “readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. While not specifically saying they are balanced, they said recent developments “have increased the uncertainty surrounding the outlook for economic growth and inflation.” Bottom line, The Fed has acknowledged the uncertain Stagflation environment we are in.
Dasm!!! Remember a Fed meeting or two ago when “Helicopter” Ben announced a 50 point cut and the markets went up something like 200 points in 3 minutes? It went from being up 40 points to down 90 in a heartbeat. Talk about insane. Do they really think lowering the rates is going to save them? I love CNBC. Rick Santelli was actually playing the sane one(for a few minutes anyway). And do people really trust Ron Insana with their money?
Hey, at least the bulls have brokerage earnings to look forward to starting with LEH on Thurs.! :-)
Rick Santelli is always the only sane one. He’s awesome. He’s the only person on CNBC across ALL their shows that has any idea of what he’s talking about.
I sit out of this one (cash). But this reaction is ridiculous. Not even the ADRs are holding, which is insurance against the weak dollar… I’d expect some bounce back to some extend.
Fed has never cut rates by 1% before without a recession kicking in. In other words, when they cut that much it’s already too late.
Market realizes it. The Fed is throwing in the towel, really tough langauge, change in the bias, 25bp cut and one member wanted 50bp.
I don’t recall such a vertical plunge before. Imagine what would happen if Helicopter Ben did nothing?
As slow as my brokerage is right now, doesn’t’ bode well for the market.
The fed does have to lube the credit market and keep it from freezing, it’s either that or we have runs on banks. and my brokerage account wouldn’t be worth the paper they print the statements on.
Ben said specifically that one of the problems we face is that “Americans don’t save”, and why would they at 1-3%…
Cutting the fed rate by 50 every time the market cries, isn’t going to help.
And look at the dollar catching a bid.
You can’t save the market by pushing the dollar off a cliff.
The collective will of the brokers is up…….regardless of the news (as we’ve all seen) it does not matter what is done. If the institutions want to take it back up…they will.
I imagine that this is being met with ALOT of quant buying at about -200
Ciao
MS
looks like the cavalry is lining up as we speak
cannon fodder misread
the 3pm pros clean up?
lets see
rgds pcm
Looks like they are trying to induce a DB in the SPY…..who knows but I REFUSE to deal in anything that allows a lag time of 4 minutes on a market order……I am watching a double bottom getting formed in the SPY……
Ciao
MS
Loved how the SPY and other easily pushed around vehicles were pushed to the HOD (along with GS and HSBC) in the minutes leading up to the news.
Alot of people got burned from :45 until about :17 after…they all have a decision to make very soon..
Ciao
MS
The old deck chair analogy is in play. The FRB’s main goal is to keep the banking system functioning. With losses here coming in $10B chunks the FRB’s cutting hairs with regards to 1% changes in inflation vs recession is pretty stupid.
There goes that Double bottom, I’ll be curious if the NASDAQ can keep a bid.
this is gettin’ fugly…volume-wise
check the Q’s and SPY……..
Ciao
MS
cavalry foundering in the quicksand
is paulson custer?
or will this be the greatest comeback since gene tunney and the long count
perhaps they’ll keep the market open until 5pm
rgds pcm
When the investment bankers start to talk recession, you can be sure that they have already positioned themselves to take adavantage of the fall.
The Morgan Stanley recession call following Goldmans Sachs claim to be positioned for the fall are signs to be heeded.
Let the fall begin!!
Who is positioned to make money in the coming months?
I thought the odds were pretty good that we’d be below the August lows before the end of the month. Perhaps the odds just got better.
At any rate, a nice day to be sitting on Dow puts.
OK, so who just bought in?
R.I.P. TED Spread.
R.I.P. One of the banks.
Thank goodness BR only used “uh oh” on this post…
Had it been the Scooby “Ruh roh”, then I would’ve really been worried.
Rate cut odds for the Jan meeting are 100% chance of another 25 bps fed funds cut to 4% and a 12% chance of 50 bps. By the late April meeting the fed funds futures are pricing in 100% chance of a 3.75% fed funds and going to 3.5% by Aug. Looking out past January is basically worthless since so much can change but I just wanted to point out the post Fed response.
The deeper this country goes into a recession the better.
There is alot of excess that needs to be purged.
Cramer already had this ready to go:
http://www.thestreet.com/s/the-fed-blew-it/newsanalysis/investing/10393981.html?puc=_tscana
PRICELESS
WAHHHHHHHHHHHH! My friends (who caused all this) are going to get laid-off and loose there homes….
wake up Cramer it’s been happening already just not to the well-insulated people located in New York (no offense BR)
Now the question is: What wildly optimistic news awaits us AFTER the bell……?
Fed Cuts Rates: Interwebs React
Reactions to the Fed rate cut came fast and sometimes furious. Here’s a quick round-up of the reactions that caught our attention. FOMC: Voted Most UnpopularDavid Gaffen, MarketBeat: “The Federal Reserve, essentially, decided to make nobody happy.” Kow…
YOU ROCK!
Thanks to your warnings, I was ready and expecting the market tumble today.
I am raking in the dough as we speak.
I do not see why the fuss about the discount rate? Banks have a stigma associated with them if they choose to utilize that source. They have chosen to NOT use it simply because of the message they think that sends to the overall market…..
Note to ego-driven bankers: Use it or loose it.
I think the Fed will cut again at the next meeting but most likely will see how we (the consumer) does over the next several weeks as to decide if it is .25 or .50 However neither will help the current situation as it stands anyway.
Ciao
MS
What’s interesting is that the lone dissenter wanted a .5 rate cut, as opposed to the lone dissenter at the last meeting wanting NO rate cut. And yes, whoever mentioned that usually, by the time the FED starts cutting rates it’s already too late is correct.
Damn, that cramer thing almost calls a bottom… Damn…
Awww did we break 1490…
Macke will be sad :(
how about 75.6 IWM
50.4 on the qqqq
146 on the spy
we break BR’s daily trend at 141, 142?
And on the lighter side of the market (full sarcasm intended)
Goldman “Sacks” down-graded Starbucks from buy to hold….on yeah SBUX hits its 3 year low today….
MS, I was using Schwab after the news hit.
At 14:21:10
The bid/ask on spy was 150.40 – 150.38
The Last was 151.11
The numbers DANCED LIKE DEMONS as fast as I could hit the quick quote,
(NAH) No Action Here….
Keep on Truckin’ everyone…..
Please someone get Dennis Kneale off the air, this guy is absolutely clueless.
>>R.I.P. TED Spread.
R.I.P. One of the banks.>>
The TED spread will only widen contrary to what we all “think” it will do.
But I do agree with R.I.P. several banks not just one.
It NEEDS to happen just as the excess caused the problem it needs to be removed so that real companies with real earnings can be allowed to grow organically, not on some cheap capital induced weekend in Vegas (that’s lasted for almost 5 years)
People rarely see that the October lows in ’02 just happened to coincide with the treasurey auctions and the need to fund a coming war.
expect surprise rate cuts on both ends should the spreads widen (most likely during an options expiry. week
;-)
Ciao
MS
And it’s only Tuesday. Hope everyone woke up short this morning, because one night to sleep on it is not gonna stop the bleeding.
intra-meeting cut is given. they thought they had problems? they haven’t seen $h!t yet. TED spread is gonna explode in the coming weeks.
the whole “moral hazard” debate at this point in time is boring, and stale. if the fed is going to embark on such a policy it needs to give markets a heads up – they haven’t done that until today. i think this was their bone.
this statement smacked of indeciveness. the fed is officially irrelevant in this cycle.
mr. miyagi said it well – “walk in middle of road – get squished, just like grape”
Ouch. This truly sucked. They really should have cut the discount rate by 50bp. I had heard someone say that the other thing they could do (but almost never do) is change the reserve requirements (i.e. loosen them). I guess that would have a huge impact but I’m thinking the time to loosen them isn’t before they’ve all made their mistakes public, if ever.
Wish I went short. Dec. puts.
I encourage everyone to listen to the interview (on B’Berg) with the new CEO of C.
It was done a few minutes ago on the TV channel so it may or may not be up at the site.
If you listened or saw it please post you’re comments….
I’m shorting the hell out of C on ANY bounce. (I just wish it was done prior to 11:15am PST)
Ciao
MS
I think the reason Citi didn’t find a “Big Name” as CEO, is cause they are working on some kind of merger, And why bring in some big name only to golden parachute him out in a few months… They also could be looking to break that sucker up into a few pieces… and same thing(though I do think they could have brought in someone special to break it up).
Just my opinion
This market had .50 bps written all over it, don’t let the morons convince you that this was because of a discount rate cut.. Discount window cuts, don’t help the market.. This is all just moron talking head talk.(as opposed to moron Blog Comment talk :) )
Blame Kudlow for that strong sell off… He started the 1/2 point stuff. and suckered liesman into repeating it.
To be honest, a recession will be welcome to a market that can’t even outpace the EURO.
The fed can’t force Europe or Asia to loan us money,(especially when we want to pay it back at .80 on the $1(if not less)) all they can do is print Hollow money. The only rate the banks can get people to bite on, to loan them money is 6-10%.
HOW can you fight the problem when you are doing the same thing that CAUSED THE PROBLEM.??
THE FED NEEDS TO STOP BAILING OUT THE FAT CATS AND RAISE RATES SO THAT REAL ESTATE CRUMBLES TO WHERE IT NEEDS TO BE. ALOT LOWER I MIGHT ADD.
Ciao,
On the C new guy interview — nothing substantial to my mind…They challenged him on it being a tough job, one likely to benefit from his “Third World” heritage and tried to pin him down on the usual new guy stuff (merger, capital, what to do now?).
I thought he held his ground pretty well and was not bombastic or defensive, and he’s no dummy that I can see.
I wouldn’t depend on my remarks to judge how the industry and markets will view him. To be honest, I’m surprised anybody saw the interview. I only saw it because there’s a TV in my bathroom and I caught bits of it while I was puking.
Ciao – correction – I saw him on CNBC, not BBerg.
Barringo,
Fed action wasn’t a radical departure from the general tone of their recent statements and actions. It’s an easing Fed. The underlying message is for consistency, caution and pacing.
If they’re leaking to Liesman true worries about the market reaction today, it’s probably because they failed to communicate that the Fed’s most powerful tools are larger in scope than the mere signals given by the nominal FF and Discount rates.
In other words, their working plans for addressing the crisis are probably undergoing a significant update that today’s actions don’t sufficiently indicate.
My guess is that, were conditions to worsen, we’d get another mid-stream statement of some technique being applied, but not necessarily a FF or Discount rate cut.
I must always defeat my own philosophical tendency to view FF and DisR changes as being more important than just interim signals.
I think they misjudged psychology today, failed to address it in their formal statement, and they’re leaking out that they did.
Uh-Oh Barringo.
One notch up, my son… re-read one notch up.