Fed Cuts Rates by 1/2%, Stock Markets Improve
18 September 2007
The FOMC meeting ended today with the much anticipated announcement of a half point rate cut.ﾃつ ﾃつ This was not a surprise, but it marked a decided shift in the Fed’s policy, as it was the first rate cut since 2003.ﾃつ ﾃつ
Stock markets soared, and the bond market is currently neutral on the news.ﾃつ The FOMC in their annoucement stated that they were still concerned about infation but reacted primarily out of concern about the credit-crunch.
The Fed announcment overshadowed the August PPI which fell 1.2% vs an expected drop of .3%, with the core data increasing .2% vs expected .1%.ﾃつ This reaffirms the remaining inflationary pressure with the more important core reading showing an increase in producer costs.
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