Wednesday, December 12, 2007

Federal Reserve Interest Rate Adjustment

The Federal Reserve again lowered interest rates, yesterday:
... the third time since Labor Day.

The move lowered the federal funds rate ... to 4.25%, and will lower bank’s prime lending rates ... to 7.25%, the lowest level in two years.

… The decision to cut or not to cut has been widely debated in recent weeks, with “doves” coming down in favor of additional cuts to spur borrowing and ease the flow of cash, and “hawks” opposing cuts for fear of prompting inflation ...

Peter Crane, head of Crane Data, said the Fed’s move was apparently an attempt to balance those opposing views.

“What the Fed is saying here is that inflation is still a concern, but we recognize there are still issues in the credit markets that need to be addressed,” he said.

“At a 0.25% cut, we still have some concern about inflation,” said Victor Li, an economics professor at the Villanova School of Business. “The core inflation rate is at the high end of what the Fed is usually comfortable with. [Federal Reserve Chairman Ben Bernanke] has emphasized in the past that the success of the Fed in the past 10 years has been to contain price increases - have price stability.”
You can read it: FOX/Business