Release Date: January 3, 2001 For immediate release The Federal Open Market Committee decided today to lower its target for the federal funds rate by 50 basis points to 6 percent. In a related action, the Board of Governors approved a 25-basis-point decrease in the discount rate to 5-3/4 percent, the level requested by seven Reserve Banks. The Board also indicated that it stands ready to approve a further reduction of 25 basis points in the discount rate to 5-1/2 percent on the requests of Federal Reserve Banks. These actions were taken in light of further weakening of sales and production, and in the context of lower consumer confidence, tight conditions in some segments of financial markets, and high energy prices sapping household and business purchasing power. Moreover, inflation pressures remain contained. Nonetheless, to date there is little evidence to suggest that longer-term advances in technology and associated gains in productivity are abating. The Committee continues to believe that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future. In taking the discount rate action, the Federal Reserve Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Atlanta, St. Louis, Kansas City, Dallas and San Francisco. 2001 Monetary policy Anyone think it could happen again? I do. 2007 policy has completely failed to reduce lending rates. We start and end the year at nearly the same outrageous borrowing costs for Main Street. Put another way, because local bank lending creates local money, the absence of that lending, shrinks local money supplies. If they dont drive rates down violently now - US economy rolls over.
As soon as I saw the title, I knew the premise of your thread: I remember that day well. I was day trading with a bunch of other traders when that happened and still feeling the pain from some longer term positions that were being decimated from the mkt decline that had begun in March, 2000. I think the Fed will continue to cut, because it's part of the current cycle, but I don't think they'll have an emergency meeting and cut 50 bps unless some extremely unexpected economic news comes out.
The cuts in the wake of the tech-bubble were a different thing (in the mix with the 911 event). Will the third cut be enough for subprime, as it was at the time of the LTCM bailout???
Sharply deteriorating news and eco data news flows this last week. If I'm right, the housing, loan demand, and loan officer data they get will be terrible, I don't see how the Fed can wait until the end of the montn to cut.
i'll never forget that day. i had 80 qqq calls i had bought a few days earlier. i recall the market was up a bit in the am and i put an order to sell on a wide spread at the ask in the am. by noon it didn't go threw so i said screw it and cancelled. then the suprise cut came around 2 pm and the futures vaulted 50 pts in minutes and i made 46k. BUT AS I RECALL THAT WAS THE FIRST CUT OF THE WHOLE CYCLE WHICH IS MUCH DIFFERENT THAN NOW WHEN WE'VE ALREADY HAD 3 CUTS SO THE SHOCK EFFECT MUCH LESS. yes the futures would ramp 20-30 but it think they would quickly fall again as the $ tanks and oil and commodities continue skying.plus the fed is in a huge box with inflation raging this time vs inflation falling then. history rarely repeats itself exactly