Market Graphic - Fed rate cuts
Stephen Gallagher, chief US economist at Societe Generale, looks at whether Fed rate cuts will succeed in calming the troubled waters of the US economy
In September, the Fed cut the funds rate and discount rate by 50 basis points on fears that restrained financial flows would harm the economy. According to the Fed, the tightening of credit conditions had the potential to intensify the housing correction and restrain growth more generally. The rate cuts were made to pre-empt disruptions to the economy. In the end, the Bernanke Fed is following the same route as his predecessor, choosing to reflate markets rather than risk an economic downturn.
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