Open Thread: A Stealth Fed Rate Cut?

Thursday, August 16, 2007 | 07:30 PM

Today's absurdity was this rumor circulating that the Fed was arranging a secret meeting.

Than the rumor came that they were going to cut next week.

But my favorite rumor du jour was passed along by the WSJ:  You see, according to some of the more cleverer Horse Central bank  Whisperers out there, the FED HAS ALREADY CUT RATES.

"The Fed's primary weapon is its influence over the federal-funds interest rate, at which banks with excess reserves lend to banks that are short reserves. When demand soared last week and the market interest rate rose above the target, the Fed pumped in extra cash. But in times of turmoil, it can be difficult for the Federal Reserve Bank of New York to fine-tune its interventions. In recent days, the rate has traded well below the Fed's target at some points of the day -- even coming close to zero at times. That has prompted some in the markets to deem this "a stealth Fed easing."

That was the reason given for the comeback today. Not that we had sold down 1,500 Dow points in less than a month, but (shhhhh!) whisper after me: "Fed cut."

Stealth cut, or absurd rumor?

What say ye?


Update: August 17, 2007 9:38am


FOMC statement

Federal Reserve Board discount rate action


Has the Fed Secretly Cut U.S. Interest Rates?
Markets Wonder As Federal-Funds Rate Lingers Below Target
DAVID WESSEL in Washington, LAURENCE NORMAN in New York, ENDA CURRAN in Sydney and MICHAEL S. ARNOLD in Tokyo
WSJ, August 16, 2007 2:25 p.m.

Thursday, August 16, 2007 | 07:30 PM | Permalink | Comments (63) | TrackBack (3) add to | digg digg this! | technorati add to technorati | email email this post



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» Is the Fed EasingRates? from The Everyday Economist
WSJs Marketbeat addresses a rumor on the street: The active conversation among the panicky revolves around whether the Federal Reserve should move to cut interest rates before its meeting about a month from now, but the slide-rule committee, t... [Read More]

Tracked on Aug 16, 2007 10:49:00 PM

» Potpourri from Resonance
Tony Snow says he is going to quit his job as White House press secretary when his "money runs out." Snow's salary is $168,000. One would assume that he also gets comprehensive health insurance coverage, though that may be assuming... [Read More]

Tracked on Aug 17, 2007 1:05:36 AM

» Fed finally reacts - the Global Credit Crunch Timeline from TRANSPARENT REAL ESTATE (
This morning the Fed finally reacts to a most turbulent week of market activity and drops the discount rate 1/2 point. Here's the domino effect that preceded the rate cut: April 2 - Subprime crisis takes down first major lender - New Century files for... [Read More]

Tracked on Aug 17, 2007 5:10:13 PM


Interesting, Roubini too claims the Fed has already effectively lowered the Fed Funds rate by 50 BP's:

He believes the Fed will need to 'formalize' this cut or else the turmoil will "sharply worsen."

Posted by: Pool Shark | Aug 16, 2007 7:37:39 PM

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