Rate cut 1/4 point
To 1%, the lowest level since 1958:
NEW YORK (CNN/Money) – The Federal Reserve cut its key short- term interest rate Wednesday by a quarter percentage point to the lowest level in 45 years, expressing worry that the economy still isn’t strong enough to fight off deflation.
Because the rate cut came in at the minimum level that people expect, it was already largely priced into the stock market, so don’t expect to see much action there. It will help to keep finance rates around their current levels, continuing to prop up consumer durable goods and housing expenditures. Some of the effects will be attenuated by the fact that so many people expected a 1/2 point cut that those expectations will shift to expecting another 1/4 point rate cut at the next Fed meeting (in August)–so firms that might have borrowed now in response to a 1/2 point cut may choose to wait two months (for a second cut) before borrowing. On balance, it’s a “hold the course” cut that, given the current course, seems a little timid. On the other hand, the Fed doesn’t want to run out of bullets (it’s got four left now).