{"id":1342,"date":"2007-08-18T00:18:50","date_gmt":"2007-08-17T16:18:50","guid":{"rendered":"http:\/\/maddruid.com\/?p=1342"},"modified":"2009-04-25T16:19:09","modified_gmt":"2009-04-25T08:19:09","slug":"1337-of-fed-cuts-discount-rate","status":"publish","type":"post","link":"https:\/\/maddruid.com\/?p=1342","title":{"rendered":"[1337] Of Fed cuts discount rate!"},"content":{"rendered":"

The Fed, in a surprise announcement in Washington, lowered the so-called discount rate by 0.5 percentage point, to 5.75 percent. Policy makers dropped language indicating their bias toward fighting inflation, and instead highlighted a rising threat to economic growth. [Fed Cuts Discount Rate to 5.75% to Ease Credit Crunch (Update4)<\/a><\/em>. Bloomberg. August 17 2007]<\/p><\/blockquote>\n

Economic slowdown has taken over inflation as the greater concern!<\/p>\n

I cannot wait to see what will happen to the federal fund rate in about a month time! By the way the market is reacting, the FFR might stay unchanged though.<\/p>\n

It is worth noting that the T-bills yield curve is slight inverted in the short run and pretty much flat in the long run.<\/p>\n

\"Mohd \"Mohd \"Mohd<\/p>\n

p\/s \u2014 amid the cut, dissent emerges. The reason for dissent against rate cut revolves around the economic concept of moral hazard.<\/p>\n

The subprime crisis is really created by borrowers lending to those that do not have the credit rating to borrow money. With the Fed coming out to bail a risky market, it only encourages risky activities to continue because lenders know that the Fed provides them with a safety net. This is why bail out is usually frowned upon.<\/p>\n

Normatively, I am against rate cut but a rate cut is what I am expecting as far as the subprime mortgage episode is concerned.<\/p>\n

This issue surrounding moral hazard might prevent the FFR from declining next month. So, the roller coaster ride might not end just yet.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Fed, in a surprise announcement in Washington, lowered the so-called discount rate by 0.5 percentage point, to 5.75 percent. Policy makers dropped language indicating their bias toward fighting inflation, and instead highlighted a rising threat to economic growth. [Fed Cuts Discount Rate to 5.75% to Ease Credit Crunch (Update4). Bloomberg. August 17 2007] Economic […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[564,495,317],"class_list":["post-1342","post","type-post","status-publish","format-standard","hentry","category-economics","tag-federal-reserve","tag-interest-rate","tag-monetary-policy"],"_links":{"self":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/1342","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1342"}],"version-history":[{"count":2,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/1342\/revisions"}],"predecessor-version":[{"id":3774,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/1342\/revisions\/3774"}],"wp:attachment":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1342"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1342"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1342"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}