NO SIGNS OF STABILIZATION

What the Fed was thinking when it cut the Fed Funds rate by a half percent to 3% on Jan. 30, according to the meeting minutes …

a relatively low real federal funds rate now appeared appropriate for a time
to counter the factors that were restraining economic growth, including the
slide in housing activity and prices, the tightening of credit availability, and
the drop in equity prices. Members judged that a 50 basis point reduction in the
federal funds rate, together with the Committee’s previous policy actions, would
bring the real short-term rate to a level that was likely to help the economy
expand at a moderate pace over time. Still, with no signs of stabilization in
the housing sector and with financial conditions not yet stabilized, the
Committee agreed that downside risks to growth would remain even after this
action. Members were also mindful of the need for policy to promote price
stability, and some noted that, when prospects for growth had improved, a
reversal of a portion of the recent easing actions, possibly even a rapid
reversal, might be appropriate.

To read more, CLICK HERE!