Rumours of an emergency rate cut

Discussion in 'Economics' started by The Kin, Mar 8, 2008.

  1. I know this is a very risque first post from a self proclaimed "contributer than a stock trad3r" but please hear me out.

    A quick search of Google News unveils the following:

    Forex - Dollar remains weak ahead of payrolls, rumours of US rate cut
    CNNMoney.com - Mar 7, 2008
    These fears have fuelled the rumours of an emergency rate cut in the key Fed Funds rate this afternoon. Simon Derrick, currency strategist at Bank of New ...

    Fed acts - but no rate cut yet
    Guardian, UK - Mar 7, 2008
    No, not an emergency interest rate cut as had been rumoured. At least not yet. Instead the Fed has announced it would hold a series of repurchase operations ...

    If you believe the Federal Reserve message, you'll believe anything
    Guardian, UK - 20 hours ago
    In recent days, there had been speculation that Ben Bernanke, Fed chairman, might be persuaded to cut rates by 75 points later this month or even announce the second inter-meeting reduction in borrowing costs this year.

    Four at Four: Emergency Fed Cut?
    Wall Street Journal - Mar 6, 2008
    Mortgage equity withdrawals continued to decline, down to a $147 billion annual rate, or about one-quarter of the 2005 peak of more than $600 billion. ...

    Fed Meeting Today: Sources Say Rampant Emergency Rate Cut ...
    DealBreaker.Com, NY - Mar 3, 2008
    DealBreaker's usually reliable sources, however, assure us that there is no "secret plan" for a rate cut this afternoon. They deny that any emergency cut is ...


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    How do these rumours get started? It's not too long ago that the last emergency rate cut was rumored than just one week before the regularly scheduled meeting, we get the highly improbable happen: a 75 bps intra meeting cut.

    It's also interesting that March fed fund futures is now starting to hint at a 100 bps cut, but April is only predicting a 75 bps cut for March. That's got to be a first. Could it be a signal that some are betting on a intra meeting cut this month?

    When was the last time the fed cut 1% at a regularly scheduled meeting? I get the impression it's a very rare event but according to some sources it's at 38% chance based on the futures price at the close Friday.