Fed Cuts Rate by 50 Basis Points

January 30th, 2008

Arguing that the downside risks to the economy continue to to rise, the Fed lowered the rates by another 50 Basis Points.? This brings the Fed Funds rate to 3.00%.? This followed a 0.75% cut on 1/22/08.? As far as I can tell, this is the largest effective percentage cut in history.? The cost of funds has been reduced by 29.4%.

Hank Paulson spoke shortly after the announcement.? He said they are focused first on getting the economy back on track and providing some additional stimulus to help accomplish this.?

The next phase is suggesting?some legislation to strenghthen lending practices and not allow the current low rates to create a second housing bubble / credit crisis.

The biggest problem I see though is that they are encouraging spending, more loans, etc., instead of boosting efforts to encourage more saving.? This may be good for the short-term, but I can’t see it being good for the long-term.

I encourage you to sound off.? I would love to get some dialogue going.

-- By +Chris Duncan

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