Home >> United States & Canada >> Economics & Trade  Email  Print Fed Cuts Federal Funds and Discount Rates by 50 Basis Points Prof. Peter Morici - 9/20/2007 Tuesday, the Federal Reserve Open Market Committee cut the target federal funds rate by 50 basis points to 4.75 percent and lowered the discount rate by the same amount to 5.25 percent.
Clearly Bernanke sees weakness in credit markets affecting the broader economy. Cutting both the fed funds rate and discount rate by 50 basis points is strong medicine, especially considering Bernanke's conservative inclinations.
Bernanke is much more incline to errors of omission than errors of commission. Information from the regional Federal Reserve Banks must indicate that turmoil in credit markets is strongly affecting business spending and taking the economy to the brink of recession.
My bet is that this move, along with other rate cuts later, as needed, will avert a recession. Peter Morici is a professor at the Smith School of Business, University of
Maryland School, and former Chief Economist at the U.S. International Trade
Commission.
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