Why is the Fed limited to raise/cut in 25bp increments?

Discussion in 'Economics' started by cszulc, Oct 26, 2007.

  1. cszulc


    Just a question wondering if anyone knows why the Federal Reserve can only cut or raise rates in 25 basis point increments? Why can't they do 1/8 increments?

    In my opinion, the Fed doesn't need to cut 25 on Wednesday, but 12.5 would be nice.
  2. rosy2


    they dont have a restriction.
  3. i dont know what they can do

    even "AAA RATED" paper is trading at 86

    trouble in river city.....
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  4. They cut any number they want to; just because most people will have difficult time to remember what is the current rates before doing some kind math in their mind first; and most people in American sucks in math with a calculator; let alone doing math in their head. forget it. :D
  5. akeyla


    :D :D :D
  6. its funny to me how because of increasing defaults and hairiness in this market, the fed funds market presumed 100% chance of a 25bp cut. But as evidenced by past price activity (50bp cut), fed activity offered no price support to these mortgages.

    the only way to fix this involves policy change the FOMC has no control over. (ie 'subprime paper bailout package')
  7. the real collapse is that no one knows what a given piece of credit paper is really worth.....

    unless you try to sell it on the street corner at 5 pm on a Friday....you'll never know