The Industry's Leading Source For F&I, Sales And Technology

Special Finance®

Feds Cut Rate on Weakening Economic Outlook

January 22, 2008

The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3.5 percent.

“The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth,” said the Federal Reserve in its statement on the cuts. “While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.”

The Federal Reserve’s current move appears to leave the door open to additional cuts to prevent a recession in light of the recent housing and credit problems. The Committee said it expects inflation to moderate in coming quarters, and it will continue to monitor inflation developments and respond accordingly.

“Appreciable downside risks to growth remain,” the Fed said in its statement. “The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.”

Fed Chairman Ben Bernanke and all but one of his colleagues voted for the FOMC monetary policy action to trim the federal funds rate 4.25 percent to 3.5 percent, which is the first time the Fed has changed rates between meetings since 2001. Voting against the rate reduction was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week.

Your Comment

Please note that comments may be moderated. 
Leave this field empty:
Your Name:  
Your Email:  

CLOSE [X]

READ NEXT

Bankruptcy Report: Increase Over 2006, Experts Say More to Come

The 4th quarter of 2007 continued the steady up trend in the bankruptcy markets, according to a press release from www.OnlineBKmanager.com.