The suspense is over. The Federal Open Market Committee lowered the target federal funds rate by 0.5%, from 5.25% to 4.75%. The Board of Governors also lowered the discount rate by another 0.5% from 5.75% to 5.25%. The discount rate was already lowered by 0.50% last month. The market wanted a 0.50% cut. The Fed obliged. The full FOMC press release is on Federal Reserve’s web site.
“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.”
Now that it’s over, the market will switch the focus to Q3 earnings instead of guessing what the Fed would do. Or maybe not. The guessing game for the October FOMC meeting will start right away. I thought this was going to happen but I’m still very disappointed. Let’s see what the market does in the next few days. Maybe the low on August 16 was it. This subprime induced correction was over before we knew it. Or maybe we will revisit that low like the market usually does. I really don’t mind either way. Whichever the case, my investment plan won’t change.
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