Showing posts from November 7, 2007

Interest rates, the Middle East and the movies

Business Times - 02 Nov 2007
Bernanke playing into the hands of Bush & Co

INVESTORS on Wall Street were expecting that when the policymaking committee of the US Federal Reserve met on Wednesday, its members would agree to cut the federal funds rate by a quarter percentage point to 4.5 per cent.

And surprise, surprise! That's exactly what happened, which is the good news, at least as far as short-term effects are concerned - and perhaps also the bad news, if one considers the long-term repercussions of the latest move by the US central bank.

The Fed had cut the federal funds rate (the rate at which banks lend to each other) by half a percentage point at its previous meeting of the Open Market Committee on Sept 18, responding then - as it did this week - to the pressures coming from the financial markets.

September's decision had clearly helped to calm the then anxious credit markets. But then, the credit markets, facing more bad financia…