Every Wall Street trader knew there was a chunky rate cut on the way. But why today?
Or maybe it's too late for that piece of advice.
The US Federal Reserve (Fed) has just cut its interest rates by 0.75%, dropping the benchmark fed funds rate to 3.5%.
Which smells to me of unalloyed, undiluted fear.
According to the Fed, a softening economic scene together with "appreciable and increasing downside risks to growth" prompted the move. Although money markets are feeling a bit better, the bigger financial picture is getting worse. As the US housing market slumps and job prospects worsen, loans for both businesses and households are being rationed.
And inflation ain't gonna be a problem, says the Fed (though there's some small print about keeping a weather eye on price rises).
Yet, you may ask, isn't this all rather old news? Every trader on Wall Street believed that a 0.5% rate cut at the end of January was absolutely ‘nailed on', with markets reckoning there was 70% plus chance of a three-quarter point chop being made.
So what caused today's rate cut rush?
There's no mention of the stock market in the Fed statement.
But the authorities would obviously have known that after this week's slump in European and Asian stock markets, Wall Street was forecast to open at least 4% lower. Or maybe more.
So the Fed has voted to try and stop the potential rot.
Today's cut -- the first ‘emergency' move since 2001 -- is aimed at stopping yesterday's share price slides turning into a fully-blown stock market meltdown.
In the middle of last year's first wave of sub-prime shocks, I had a beef at Fed interest rate policy, suggesting that the US central bankers were being unduly influenced by big Wall Street banks.
Maybe that was a bit harsh. Some of the subsequent evidence emanating from America, in particular in domestic property, has been scary enough to justify lower loan costs.
But times have moved on. Whilst the financial institutions won't be complaining about this afternoon's rate response, there's now much more at stake than bankers' bonuses.
Today's precipitate action implies one of two possibilities:
Either that the Fed knows a bit more than we do about what's in the wings. And that something really nasty is about to emerge.
Or that the US central bank has just given in to pure panic.
Neither feels very reassuring. Markets have more bad days ahead.
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