(Update1) Fed Funds Rate Cut to .25%by Tim Manni
The Federal Open Market Committee concluded their meeting today by announcing that the new target for the Fed Funds rate will be between 0 and .25%. The Fed now has very little ammunition left to correct monetary policy through future Fed-Fund rate cuts.
As expected, Fed Chief Bernanke announced that economic conditions had “weakened further,” and that since “inflationary pressures have diminished appreciably,” the central bank was able to use most of the little ammo they had left.
Market observers will be now be poring over the final portion of today’s announcement to find clues to the ongoing (or upcoming) policies that will be utilized to improve the private markets.
Here’s the final portion of the Fed’s initial announcement:
The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.
Note the second-to-last sentence — the Fed, without providing any details, has announced a new program — the Term Asset-Backed Securities Loan Facility. The last sentence also backs up our earlier predictions that the Fed will continue to develop initiatives to “support credit markets and economic activity.”