Localism: Another Fed Funds & Discount Rate Cut

In much anticipation, the Federal Open Market Committee met today to discuss monetary policy and the outcome was yet another Fed Funds Rate cut; 25 basis points (.25%) down to 4.25%.

From the Press Release:

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.

Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Furthermore, if you've been following the news, Bloomberg issued a report today with respect to the Discount Rate; Fed Discount Window Borrowing Has Risen $2.1 Billion. Which ultimately prompted the Fed to act accordingly during today's FOMC meeting. Further from the Press Release:

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent.

This would ultimately make for our 3rd Fed Funds Rate cut since September. It's expected that the Fed will continue to act accordingly as we head into the new year since there has been signs that consumer spending has slowed significantly in light of the changes also in our housing market.

Strains in the financial markets as of late are evident and the continuing market correction has accelerated it's course by way of greater restrictions and guidelines. While inflation remains a concern, it appears the Federal Reserve and our Chairman Ben Bernanke are ready to act accordingly.

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