Why did the Fed choose to reduce rates at the discount window (50 basis pts to 5.75%) rather than target a new Fed Funds Rate? To avoid an appreciation of the US dollar. Higher interest rates would make the dollar more attractive and lead to a stronger dollar. This would be a disaster for the 14,000 Dow, well, 13,000 this week (see "Subrime Mess" below).
A weaker dollar means cheaper exports. Corporate earnings due to global sales have been driving this bull stock market run. Companies such as Cisco, Caterpillar, GE, benefit from the artificial reduction of their product's price. Higher interest rates would (economically speaking) increase demand for the dollar on the FX markets and drive up its price, and thus the price of US made goods and services.
Having said that, look for the Fed to reduce interest rates (Fed Funds rate target) a quarter point to 5% to signal more love to the financial sector and provide some relief for the housing market. Any official move to reduce the rates below 5% would signal a stimulative move and the threat of a recession.
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