Fed Cuts Rates 75 Bps

The Federal Reserve cut interest rates today by 75 basis points. The Fed’s latest move brought the federal funds rate down to 2.25 percent, the lowest point since late 2004. It also marked the Fed’s second back-to-back cuts of three-fourths of a percentage point. The Fed has also cut the funds rate six times since last September, with the reductions becoming more aggressive since January. Despite this latest cut, market participants who were expecting a 100 basis point cut in rates, said today’s move is not sufficient to help out the beleaguered financial markets. However, this puts the Fed in a better position to help out given the recent creation by the Fed of the term securities lending facility, or TSLF, among other things, participants said. “While the Fed was slow to clue in to how quickly things could unravel, recent events show Bernanke & Co. now fully comprehend the risks to the economy and to the financial system,” said Max Bublitz, chief strategist at SCM Advisors. He added that today’s Fed action has had a greater impact than it otherwise would because the Fed had previously expanded the number of financial institutions that could access cheaper liquidity. “With the TAF, TSLF, and PDCF in place, today’s less-than-expected rate cuts will be felt more directly and more fully by those institutions involved in the process of creating credit,” Bublitz stated.