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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: TH who wrote (100247)12/14/2008 5:37:10 PM
From: Robin Plunder  Read Replies (2) of 110194
 
seems like the actual fed funds rate is already between .1 and .2%....so not cutting 50 would be acting contrary to market, which fed has not done very much in the past..they tend to follow market. from John Mauldin this week:

"Speaking of zero interest rates, the posted Fed funds rate may be at 1%, but the actual market is trading at very close to zero. That means that banks can get money that is effectively free. The Fed meets next week in what was supposed to be a one-day meeting but which has now been scheduled for two. Guess they think there is a little more to talk about.

The Fed will cut rates next week. But with the effective real market rate now at zero, what difference does a cut make? I hope they do the right thing and go ahead and cut at least 75 basis points, if not more. That would stop the speculation and let them move on to quantitative easing and other allied policies, which we will explore in some future letter. Whether they should pursue some of the more radical policies is open for debate, but it is more important today for us to figure out what they are going to do and adjust our portfolios correctly than to debate policy."

he is actually calling for 75 bp to make a better match between official rate and market.

Robin
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