Is the Fed rate cut indicating a crisis brewing?
*Barron's, by Randall W. Forsyth, September 18, 2007
“IS THIS THE CALM BEFORE THE NEXT STORM?
Although the crisis conditions in the money and capital markets showed signs of subsiding, the Federal Reserve chose the more aggressive option of a half-point cuts in both the federal-funds target rate and the discount rate.
Clearly, Ben Bernanke & Co. see more trouble ahead for the beleaguered housing and mortgage markets, with a rising tide of resets in adjustable-rate mortgages only adding to the record number of delinquencies and foreclosures.”
“Meantime, the FOMC paid lip service to inflation, saying “readings on core inflation have improved modestly” but that risks remain.
But the dollar’s purchasing power was diminished further following the Fed’s rate cuts. The Fed’s Dollar Index fell further while the euro and crude oil notched new highs today. And bond prices slumped while gold continued to rally.”
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