Tuesday, September 18, 2007

FOMC Statement, Sept 18, 2007

The FOMC cut rates 50 bps.

Here's what I found interesting from their statement:

First, the rationale was preemption: "Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."

Second, the vote was unanimous. Even William Poole and Thomas Hoenig, who had given the most hawkish speeches prior to the meeting, voted in favor. I had thought that at least one might dissent, which might have helped keep the hit to inflation expectation down.

So it appears the argument over whether this Fed believes preemptive policy easings are justified is now over. The risk managers won.

1 comment:

psummers said...

I was also surprised by the unanimity. It'll be interesting to what message is received (apart from the "helicopter Ben"/"bailout" sort of crap). I personally think they were trying to do a "one and done" kind of move. That could've gotten the hawks on board.

Interesting times...