Fed will certainly implement a half-point cut

2008-02-29 15:58:15 (GMT) (Caymanmama.com - News)

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Washington: Ben Bernanke, the central bank chief, this week did not tell the Congress about what exactly the Federal Reserve is going to do next, but he certainly made an impression in the Wall Street that half-point cut is likely to take place for sure.
The meeting of the policy makers of the Federal Reserve is scheduled again on 18th March. For now, the futures that are listed on Chicago Board of Trade point towards 100% chances of half-point cut and 32% chances of Fed slashing the rates of interest by 3 quarters of a percent point. “A 50-point cut seems to be a reasonable compromise. Any more than that and he will catch some inflation flack,” says Stuart Hoffman, the chief economist at the PNC Financial Services. As part of a semi-annual hearing on the monetary policy of Fed, after spending two days in the Senate and the House, Bernanke outlined 3 challenges that are coming in the way of Fed: the risk of economy falling into recession, disorder in the financial markets and risk of increase in inflation. But he was more concerned about the US economy, and focused more on different ‘downside risks’ for the economy including health of the consumers and the constant deterioration in the housing sector that is already troubled.
The comments of Bernanke along with other troubling numbers of the economy published on Wednesday and Thursday, made firmed steps towards the next move of Fed. Even before Bernanke’s comments, investors were guessing that half-point cut is quite certain. The future markets also suggested a 94% chance of Fed implementing a half point cut.

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