Fed orders emergency rate cut to 1.5 percent

[ryanduff]

AP
Fed orders emergency rate cut to 1.5 percent
Wednesday October 8, 7:07 am ET
By Jeannine Aversa, AP Economics Writer
Federal Reserve cuts key interest rate by half a percentage point, seeks to revive markets

WASHINGTON (AP) -- The Federal Reserve cut a key interest rate by half a percentage point Wednesday to steady an economy teetering on the kind of financial collapse that America suffered in 1929.

Fed Chairman Ben Bernanke and his colleagues ratcheted down their key rate by 0.5 percentage point to 1.5 percent. The action revives the central bank's rate-cutting campaign which had been halted in June out of concerns that those low rates would worsen inflation. Since then, however, economic and financial conditions have dangerously deteriorated, forcing the Fed to reverse course.

The fact that the Fed felt it couldn't wait until its regularly scheduled meeting on Oct. 28-29, underscored the urgency of the situation.

The Fed took the action in a coordinated move with other central banks, which also were cutting their rates.

"The pace of economic activity has slowed markedly in recent months," the Fed said "Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."

Although inflation has been high, the Fed believes that the recent drop in energy prices and the weaker prospects for economic activity have reduced this threat to the economy.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) -- The Federal Reserve has ordered an emergency interest rate cut of a half a percentage point to cope with the worst financial crisis since the 1929 stock market crash.

Fed Chairman Ben Bernanke and his colleagues ratcheted down their key rate by 0.5 percent, to 1.5 percent. The action revives the central bank's rate-cutting campaign which had been halted in June out of concerns that those low rates would worsen inflation. Since then, however, economic and financial conditions have dangerously deterioriated, forcing the Fed to reverse course.

The fact that the Fed felt it could not wait until its regularly scheduled meeting late this month underscored the urgency of the situation.

[jsgolfman]

This will do nothing but create a panic.

[kathy88]

I'm really beginning to think Bernanke is mentally retarded.

[ryanduff]

This will do nothing but create a panic.

Yup... just like any other time Bernanke speaks.

Ironiclly, DOW futures rebounded a bit. I"ll be curious to see what happens once the market officially opens, especially what happened with Asia and Russian markets, and the decline in European markets so far today.

Tomorrow will probably be worse with the short ban coming off at 11:59PM tonight.

[angelatc]

This will do nothing but create a panic.

This is the exact opposite of what they should be doing. Lower price increases demand. Lowering the price of credit increases the demand for credit, which we are already out of.

Man this blows.

[GunnyFreedom]

This is the exact opposite of what they should be doing. Lower price increases demand. Lowering the price of credit increases the demand for credit, which we are already out of.

Man this blows.

"It's a cold, and it's a broken hallelujia."

END THE FED!

[rockandrollsouls]

Futures are way up right now...We might see a rally into the green for one day...if that. If so, it might be a good time to snag some put options on the DOW.

[angelatc]

I'm really beginning to think Bernanke is mentally retarded.

LOL! I think he is a man with a pet tiger.

[ryanduff]

Futures are way up right now...We might see a rally into the green for one day...if that. If so, it might be a good time to snag some put options on the DOW.

No offense, but just like everybody out to make a quick $$. That's what got us into this mess in the first place!

[Sandra]

Yee Haaa! I'm going to buy a.....
oh wait, I don't have any money.

[rockandrollsouls]

No offense, but just like everybody out to make a quick $$. That's what got us into this mess in the first place!

Trading securities doesn't have anything to do with excessive credit and bad business decisions, buddy. :rolleyes:

[angelatc]

"It's a cold, and it's a broken hallelujia."

END THE FED!

Exactly. IN a free market this wouldn't happen because the rates would have drifted up and down naturally over the past few years.

Bernanke and Greenspan kept rates artifically low. Price controls create shortages. We're out of credit.

They go to school and study fancy theories and charts, and they come out thinking they're smart enough to override natural law.

[schweicks88]

more importantly, they announced Putin is releasing a judo dvd titled "learn judo with Vladimir Putin"

[rockandrollsouls]

more importantly, they announced Putin is releasing a judo dvd titled "learn judo with Vladimir Putin"

I'd buy it. We might need to know some form of self defense in the future.

[freelance]

We are toast, and they are crazy!

So, if they want to postpone it a day or two or until after G7 this weekend, I say FINE. Just gives me more time for last-minute preparations. I'm thankful for ONE MORE DAY at this point. One cannot be too prepared!

[angelatc]

Trading securities doesn't have anything to do with excessive credit and bad business decisions, buddy. :rolleyes:

Well, they kind of do. Keeping rates low makes it possible for business to borrow at rates below the level they should be able to borrow at.

Paying less for interest leads to profit and growth. Wall St loves profit.

But it's artificial. Do you see a fast food restaurant on every corner? That's saturation. Lots of those places wouldn't have been built if the rates had made them a little more cost prohibitive.

Here's my thought - how long before Ben fires up the helicopter again?

[schweicks88]

I'd buy it. We might need to know some form of self defense in the future.


http://i.dailymail.co.uk/i/pix/2008/10/07/article-1071392-02EDFE4300000578-503_468x1083.jpg (http://www.dailymail.co.uk/news/worldnews/article-1071392/Macho-Putin-releases-Lets-learn-judo-Vladimir-DVD.html)

[rockandrollsouls]

Well, they kind of do. Keeping rates low makes it possible for business to borrow at rates below the level they should be able to borrow at.

Paying less for interest leads to profit and growth. Wall St loves profit.

But it's artificial. Do you see a fast food restaurant on every corner? That's saturation. Lots of those places wouldn't have been built if the rates had made them a little more cost prohibitive.

Here's my thought - how long before Ben fires up the helicopter again?

Angelatc, how does the purchase of an option contract affect the company? How does my sale of stock to another person have anything to do with a company's finances? They've gotten their money in the primary market.

I don't know how you think that directly relates to rates....the other user was inferring my purchase of options or stock is "what got us into this mess" which is simply false. Like I said, the purchase and sale of securities doesn't exactly constitute manipulating the fed funds rate, engaging in risky business practice, or cooking the books. :rolleyes:

[nobody's_hero]

So, we're at 1.5%.

How long before the Fed starts paying interest to the banks for loaning them money? :p

May as well go ahead and lower it to –1.5%

[RonPaulCentral]

The futures and market rally are just PPT manipulation following the rate cut.

At 6am the market Dow futures were -300

This is all market games. It will be back to tanking tomorrow.

[schweicks88]

The futures and market rally are just PPT manipulation following the rate cut.

At 6am the market Dow futures were -300

This is all market games. It will be back to tanking tomorrow.



I agree, pre-market dow was up like 250 points going into yesterday and look how it ended up

[FindLiberty]

So, we're at 1.5%.

How long before the Fed starts paying interest to the banks for loaning them money? :p

May as well go ahead and lower it to –1.5%


exactly!

[rockandrollsouls]

I agree, pre-market dow was up like 250 points going into yesterday and look how it ended up

I don't deny it, but if the market manages to pop its head up for air, you still know its drowning. Why not cash out?

Of course, I'd prefer that the market be allowed to work itself out....I'd give up all the money I've made thus far if that could be the case.

[ryanduff]

The futures and market rally are just PPT manipulation following the rate cut.

At 6am the market Dow futures were -300

This is all market games. It will be back to tanking tomorrow.

My thoughts exactly. I had a feeling it was all artificial when I saw the market futures jump from -300 to +100 in a few minutes following the rate cut. I have a feeling the market will drop quite a bit today. If we don't reach circuit breaker levels today, we probably will Thursday or Friday.

http://fourwinds10.com/siterun_data/government/banking_and_taxation_irs_and_insurance/social_security/news.php?q=1223248916


NEW YORK , September 30, 2008 -- The New York Stock Exchange will implement new circuit-breaker collar trigger levels for fourth-quarter 2008 effective Wednesday, October 1, 2008.

Circuit-breaker points represent the thresholds at which trading is halted marketwide for single-day declines in the Dow Jones Industrial Average (DJIA). Circuit-breaker levels are set quarterly as 10, 20 and 30-percent of the DJIA average closing values of the previous month, rounded to the nearest 50 points.

In fourth-quarter 2008, the 10, 20 and 30-percent decline levels, respectively, in the DJIA will be as follows:

Level 1 Halt

A 1,100-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later unless there is a level 2 halt.

Level 2 Halt

A 2,200-point drop in the DJIA before 1:00 p.m. will halt trading for two hours; for one hour if between 1:00 p.m. and 2:00 p.m.; and for the remainder of the day if at 2:00 p.m. or later.

Level 3 Halt

A 3,350-point drop will halt trading for the remainder of the day regardless of when the decline occurs.

Background:

Circuit-breakers are calculated quarterly. The percentage levels were first implemented in April 1998 and are adjusted on the first trading day of each quarter. In 2008, those dates are Jan. 2, April 1, July 1 and Oct. 1.

[RonPaulCentral]

I don't deny it, but if the market manages to pop its head up for air, you still know its drowning. Why not cash out?

Of course, I'd prefer that the market be allowed to work itself out....I'd give up all the money I've made thus far if that could be the case.

You just might get your wish sir.

[rockandrollsouls]

You just might get your wish sir.

If you are inferring that I wish the market drown, you are mistaken.

[RonPaulCentral]

If you are inferring that I wish the market drown, you are mistaken.

No I followed what you were saying. I am saying that is very well might work out that way.

[rockandrollsouls]

No I followed what you were saying. I am saying that is very well might work out that way.

Lord knows what will happen :(

[ShowMeLiberty]

I'm really beginning to think Bernanke is mentally retarded.

http://images.icanhascheezburger.com/completestore/2008/10/7/128679124728770154.jpg