Official - Will The Fed Cut Rates? on 9/18 Discussion
 

Will the Fed cut rates? Should the fed cut rates? How will the market react?

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

While not as well versed on the subject as others on the board, I would guess the Fed will cut the FFR by .25%. I don't think Bernake particularly wants to given inflationary concerns and the negative pressure on the dollar, but I think he has been backed into a corner. The market expects a cut and the housing and credit markets are straining right now - I think the Fed will react. Still, I can't see the Fed making a half a percentage point cut right now, and I think the market has priced in greater than a .25% cut, therefore I believe the market will hold steady or slightly decline after the announcement. My 2 cents.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

I think they need to hold steady. Recession is inevitable no matter what they do so they might as well try to salvage the dollar. Wall Street is already pricing in multiple rate cuts so Bernanke might give them what they want. Undecided between .25 or no cut. I voted hold steady.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

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I think they need to hold steady. Recession is inevitable no matter what they do so they might as well try to salvage the dollar.

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I am torn on what I think they should do. I am all for letting the market run its course and letting people pay for the bad decisions they've made. I do not believe it is the Fed's responsibility to bail us out. On the other hand, I think to some extent the Fed keeping rates so low in 2002-2004 provided fuel for this mess, and slightly reducing rates now allows them to correct for a previous mistake.

Ultimately, as a young investor with a long horizon, I am more concerned about inflation or the declining dollar hurting me over my lifetime than an immediate correction in the housing/credit markets. I guess I'd hope they hold steady, but ultimately I think they will lower rates.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

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Will the Fed cut rates? Should the fed cut rates? How will the market react?

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i was gunna make this poll but saw you just did...

unfortunately you messed it up lol it should be

Question 1: do you think the fed will cut rates? hcoices should be a) no, b) .25 bps to 150bps

Question 2: do you think the fed SHOULD cut rates? choices should be the same.

i think the fed will cut rates by 50 bps.

i think the fed SHOULD either hold rates steady or cut by 25bps.

id really like to see the fed hold rates at 5.25 right now. if things get bad between that decision and the next one in october, then they can cut by whatever they think is necessary.

1month will not imo make a big difference in the real economy.

a hold right now will tell the markets "the days of a fed put are over"

Barron

Barron

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

My opinion is that the market is demanding a 50bps drop and the Fed will reluctantly drop 25bps but they would actually prefer to keep the rates the same--I believe they will cave to the pressure by meeting them half way.

dandy

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

I dont see how 25bp now will cause inflation risk to increase. Its not the fed bailing out the market but responding to a slowing economy.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

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I dont see how 25bp now will cause inflation risk to increase. Its not the fed bailing out the market but responding to a slowing economy.

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well, in theory, it probably shouldn't since it is a small relative change in a time when it is seen by the markets to be needed.

but in reality, one major driver of inflation is inflation expectations. a 25 bp cut now could cause planning for future inflation to occur.

the counter argument is that the fed has been so good at retaining a low inflation rate that businesses will hold onto that faith until data disprove it.

i believe, like you, that a 25bp cut won't spark inflation...

but we are at a place now where inflation could EASILY increase quickly. capacity utilization is at 82.2%, .2% higher than concensus and really surprising. that is freaking high.

the main message the fed should send, again imo, is that there is no more and will be no more "fed puts." if you take risks, you pay the consequences.

Barron

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

I said hold steady but the correct answer is probably a 0.25% cut.

I said hold steady becaue I interpret (perhaps wrongly) the surge in discount window lending reported last night as a sign the FED's emergency discount window rate cut on August 17th is accomplishing the objectives the FED wanted.

Of course, one can easily make the argument that if banks are using the discount window, then there's still turmoil in the money markets that requires additional stimulus.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

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I said hold steady but the correct answer is probably a 0.25% cut.

I said hold steady becaue I interpret (perhaps wrongly) the surge in discount window lending reported last night as a sign the FED's emergency discount window rate cut on August 17th is accomplishing the objectives the FED wanted.

Of course, one can easily make the argument that if banks are using the discount window, then there's still turmoil in the money markets that requires additional stimulus.

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nowhere in the fed's responsibilities lies solving market turmoil.

in fact, the fed funds rate shouldn't move at all if the only worry is turbulence in the money markets.

turbulence in the money markets comes from:

- interbank rates higher than policy rates by a wide margin. this comes from banks not wanting to lend to each other. they don't want to lend to each other because they don't know how much money they'll need for their own purposes AND they don't trust other banks/collateral provided by other banks for those loans.

- money market mutual funds are being sold (investors are seeking redemptions) into this market and many providers have been using asset backed commercial paper (ABCP) backed by subprime mortgages markets to generate returns. this generates more pressure on money markets as people flee anything associated w/ the "contagion"

- the whole source of this problem of course comes down to the subprime mortgages and their use. many of them were securitized and given high ratings by ratings agencies and purchased by tons of investors worldwide. those ratings proved possibly to be wrong as expected defaults rose and prices plummeted.

risks that were thought to be diversified and bore by willing investors were actually obfuscated and the source of market wide paranoia.


so, the fed can't really do much more here than it already has done.

using the discount window is a good thing now (relatively speaking lol)

Barron

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

Ok, I am a fish. I was talking to a guy at the poker table today that seemed semiwell vesred in this and he was talking about buying up a lot of pepsi stock, with the intention of holding it for a long time, assuming they cut the rates. I was wondering what is the point of this? Are most of the stocks expected to take a downward turn if the rates go down? Any other elaboration about this would be appreciated.

market says:
 

rougly 12% of nothing, ~43% 25% cut, and ~45% of 50bp cut.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

[ QUOTE ]
Ok, I am a fish. I was talking to a guy at the poker table today that seemed semiwell vesred in this and he was talking about buying up a lot of pepsi stock, with the intention of holding it for a long time, assuming they cut the rates. I was wondering what is the point of this? Are most of the stocks expected to take a downward turn if the rates go down? Any other elaboration about this would be appreciated.

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If rates are cut, stocks will hold steady or go up, in all likelihood.

James

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

[ QUOTE ]
[ QUOTE ]
Ok, I am a fish. I was talking to a guy at the poker table today that seemed semiwell vesred in this and he was talking about buying up a lot of pepsi stock, with the intention of holding it for a long time, assuming they cut the rates. I was wondering what is the point of this? Are most of the stocks expected to take a downward turn if the rates go down? Any other elaboration about this would be appreciated.

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If rates are cut, stocks will hold steady or go up, in all likelihood.

James

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not exactly.

if the market is pricing in >25bps of cuts (which it is...or at least was last week) and the fed cuts 25bps, the equity market could fall as the cut would be less than expected.

it may just hold as it shows the fed is willing to do "something" to mitigate forthcoming negative effects on the real economy. so depending on the size of hte cut, markets could go up, down, or sideways [img]/images/graemlins/wink.gif[/img]

Barron

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

They will definetly cut rates.......the question is how much.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

probably 25 points but whether 25, 50 or none it shouldnt matter that much going out a ways. it is only a bandaid what they do right now.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

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probably 25 points but whether 25, 50 or none it shouldnt matter that much going out a ways. it is only a bandaid what they do right now.

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Your exactly right..........

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

I suspect it will be the expected 25 bps cut but what may prove to be more important is the bias of their forward looking statement. Hopefully the Fed will retain a neutral bias, the market will dislike this very much, my puts will increase in value then two days later the market will accept the facts and resume it's bull run.

Well no harm in hoping for the perfect outcome is there?

Jimbo

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

I have what is quite possibly a ridiculously noob question for this discussion, and for that I apologize in advance...

I am buying a house, and after much bartering with two different companies, just locked a 30-year fixed mortgage at 6.25% on Friday. How much better could I have conceivably gotten if I waited until after the cut (assuming they cut it .25 as widely anticipated)?

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

Mortgage rates don't normally move that fast after a fed cut. It takes a few months to trickle down.

Steve

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

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probably 25 points but whether 25, 50 or none it shouldnt matter that much going out a ways. it is only a bandaid what they do right now.

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more details please.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

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probably 25 points but whether 25, 50 or none it shouldnt matter that much going out a ways. it is only a bandaid what they do right now.

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more details please.

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"Fed can't stop recession: Even if the central bank starts to cut rates aggressively, many of the risks for the U.S. economy are beyond its reach."
http://money.cnn.com/2007/09/13/news...atrick.net=yes

http://articles.moneycentral.msn.com/Inv...ref=patrick.net
http://pr-gb.com/index.php?option=com_co...ref=patrick.net

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

I think the Fed cuts rates, the Fed is behind the curve by alot IMO. One rate cut doesn't matter that much, a series of cuts do though.

The statement: Inflation risk contained, downside risks to economic growth have increased, economic growth slowing but we don't see a recession on the horizon or some such.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

I generally dislike reading mainstream financial news as it is all reactionary and half the time gets the reasons for something wrong. I didn't click the links but I'm going to assume the same thing happens here.

I'd really like a rate hold in 20 minutes, but I'm realistically hoping for an only 25bps cut. 50bps would make me sad [img]/images/graemlins/frown.gif[/img] Luckily, I don't think that is very likely despite the market incorrectly (imo) pricing a decent chance of it in.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

Kiss the Dollar goodbye. Hope you guys got Gold or foreign currency.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

So sickkkk.

.5 points!!!

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

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Kiss the Dollar goodbye. Hope you guys got Gold or foreign currency.

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Jesus Christ haven't read the report yet but I'm disappointed. 1/2 point for those who don't know. [img]/images/graemlins/frown.gif[/img]

Thank god for foreign exposure though I still feel too US heavy with 50% USA dollar-denominated equities.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

PS - If they cut rates again next month I'm going to be really mad. 50 bps isn't the world's worst thing if it is one off but I doubt it will be.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

"Release Date: September 18, 2007
For immediate release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these 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; Eric Rosengren; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco."

http://www.federalreserve.gov/newsev.../20070918a.htm

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

Gah the discount rate too?

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

S&P immediately jumped over 1.3% to post almost 2% gains for the day now.

Don't have dollar data in front of me, but I'd expect the exact opposite happened to it.

Edit: The Euro is almost up to $1.40 on xe.com and yahoo finance but I don't know if this rate is updated during the day.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

Tell me why Yahoo Finance is down during this important moment.

Also, now the question will be "will the Fed continue to cut rates?"

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

How much of a correction are we going to see tomorrow? how long will this rally last?

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

Madness.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

This is ridiculous. The high for QQQQ is 2,000 for today. wtf.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

This is the first time I get emotional with the market. Seeing all these green numbers literally gave me a headache. Probably tension being relieved and the blood got chaotic.

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

http://www.bloomberg.com/markets/currencies/fxc.html

USD/EUR 1.40 here we come!!!

Also it looks like we're fast approaching 1:1 against the CAD. BOOOYAH!

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

annnnnnnd settlement for the futures... about 43 points up for the S&P today.... crazy

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

I dont know what everyone is getting worked up about.

It seems obvious that the solution to a crisis in the international banking and financial system brought about by cheap money and irresponsible lending is a cut in interest rates. [img]/images/graemlins/crazy.gif[/img]

Re: Official - Will The Fed Cut Rates? on 9/18 Discussion
 

[ QUOTE ]
"Release Date: September 18, 2007
For immediate release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these 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; Eric Rosengren; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco."

http://www.federalreserve.gov/newsev.../20070918a.htm

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Different than Greenie speak so I was off on inflation risks contained type language. Markets were sizzlin today after the announcement. Really good rally. I'm hoping for a little follow through tomorrow. Looks like new highs for the DJIA and S&P 500 as well are imminent.