Despite yesterday’s sharp interest rate cut by the Fed the market anticipated the move. Stocks jumped on the news that the Federal Reserve decided to cut its key interest rate by a 0.5% to 4.75% and the dollar crashed to its historic lowest level against the EUR. The Fed slashed interest rates in order to protect the U.S. economy from sinking into a recession; sparked by the turmoil in the credit and housing markets. During the FOMC meeting, Fed chief Ben Bernanke stressed that the central bank will continue to act as needed to promise price stability and sustainable economic growth.
According to Fed’s chief Bernanke’s latest move, we can understand that he is more concerned by the sign’s of a possible recession which are caused by the tumble in the housing market, jobs market, and the significant reduction in retail sales.
Along with an Interest Rate decision, although somewhat overshadowed by it, other U.S economy news continued to flow yesterday prior to the interest rate news, further exacerbating the currently limping U.S economy. The USD PPI index released at -1.4%, down from last month’s figure of 0.6% and well below the forecasted figure of -0.2%. Housing Market Index released inline with expectations at the level of 20, yet down from the previous month’s figure of 22.
The U.S CPI index is on tap today along with the Housing Starts and Building Permits. All of the latest are expected to come out quite negative.
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