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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
By LEON HADAR
WASHINGTON CORRESPONDENT

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…