What if the Fed lowers only the Discount rate?

Discussion in 'Trading' started by crgarcia, Nov 15, 2007.

  1. As a symbolic policy?
  2. xiaodre


    well, we go down, and there might be a cheer on the floor, just like there was when Bernanke cut 50bp.

    115% chance of a 25bp cut, 57% chance of a 50bp cut.

    A lot of money is transferred when the fed surprises people, I'm told.
  3. If only the discount rate is lowered, the fed funds rate cut can come later as the market keeps pricing in additional easing(s) in order to create the appearance that the Fed is "behind the curve" instead of being pre-emptive.
  4. in light of the libor squeezes and more importantly 'the turn'.

    there is every chance the fed will cut the discount rate.

    as for the fed funds rate forget it.

    that has proven to be of no use whatsover in this environment.

    we have cut 75 basis points and the market overall in the credit markets is now in a worse state than it was pre august.
  5. That's only because they havn't tried a negative fend fund rate yet ;)
  6. With inflation at 3.5% year on year, now, I think they might pause unless we get real dire economic news. Recession by January will be reported by July
  7. OMG

    Can't Larry Krudlow ever STFU!

  8. xiaodre


    actually, if I may ask a related question:

    what happens to the usd/cad if the fed cuts 50bps?

    or the usd/eur?
  9. The dow surged 200+ points when the discount was lowered 50 points on Aug 17th

    dollar will fall, oil will rise this is econ 101
  10. xiaodre


    yeah, but I never took econ 101. I guess I should clarify: do these cuts get priced into forex pairs the same way they get priced into the futures markets?

    Thanks in advance,
    #10     Nov 16, 2007