Highlights
The Federal Open Market Committee gave the markets what they wanted - a 50 basis point cut in the fed funds rate target and also tossed in a 50 basis point cut in the discount rate. The vote was unanimous for both. The fed funds target rate is now 4-3.4 percent and the discount rate is now 5-1/4 percent. The Fed made the cuts to forestall adverse effects on the economy from financial disruptions but still sees inflation as a risk. The statement gives no hint of immediately pending additional rate cuts. Based on the FOMC statement,the Fed primarily moved to try to get ahead of the curve of deteriorating economic conditions. "Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."

While many still think the Fed will continue to cut interest rates during the rest of 2007, the statement actually takes a neutral stance. Yes, the Fed cut rates coming off an August statement that had an anti-inflation bias - something that is rare. The Fed usually goes to a neutral policy stance and then slow growth/recession risk stance before cutting rates. And now the Fed emphasizes equally "the uncertainty surrounding the economic outlook" and the fact that "some inflation risks remain" - a neutral policy stance now that rates have been cut 50 basis points.

Key comments on these balanced risks follow.

"Developments in financial markets since the Committee's last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully."

Yes, the financial markets are likely to plead for more interest rate cuts this year. The Fed seems to be saying that they will wait and see.

The Fed's next policy meeting is scheduled for October 30-31 and today's move nonetheless is considered by many to just be the first of several by many Fed watchers - although a minority thinks the Fed will be very cautious before making another cut soon. But leading off for the next round of debate for the Fed's next move will be tomorrow's CPI report and housing starts report. Also, traders and investors will now be closely listening to Fed Speak in coming weeks to see whether the markets get a trick or a treat on Halloween afternoon.

2007 Release Schedule

Released On: 1/31 3/21 5/9 6/28 8/7 9/18 10/31 12/11 Released For: Dec Feb Apr May Jul Aug Sep Nov