Bernanke opens gas: U.S. rates are now again at 1%

Washington - October 29, 2008 - As planned, but not missing those who expected a cut of three quarters of a point. The Federal Reserve has lowered interest rates by 50 basis points unanimously to place them at 1%, its lowest level since 2004. Concerns about inflation seem to have become better life judging by the communique of the meeting.

For awaited the Fed's decision was the worst kept secret from all over Wall Street because, he said Art Hogan, chief market strategist for Jefferies & Co, a MarketWatch, "every man, woman and child on the planet knew that Fed would cut 50 basis points to 1%. "

The institution chaired by Ben S. Bernanke, in coordination with the European Central Bank (ECB), the Bank of England and the central banks of Switzerland, Sweden and Canada, already announced last Oct. 8 of another surprise cut by another 50 points, which following the decision of today puts the federal rate at the minimum levels set during the tenure of Alan Greenspan from June 2003 to June 2004.

In the last thirteen months, the financial crisis plaguing the markets has led to a cut of 425 basis points in interest rates in the U.S. with the aim of reviving the credit market and avoid economic recession.

Opening gas: inflation no longer concerned

"In light of the decreases in the prices of energy and other raw materials, and the outlook for weaker economic activity, the Committee expects inflation to moderate in coming quarters to levels consistent with price stability," The Fed noted in its press release.

"The pace of economic activity appears to have slowed sharply, mainly because of reduced consumer spending. Spending on business equipment and industrial production have been weakened in recent months, and the slowdown in economic activity in Many foreign economies is damaging the prospects for U.S. exports. In addition, the increased volatility in financial markets is likely to exert additional pressure on consumption, partly by further limiting the ability of families and businesses to obtain credit, "argued the Committee Federal Open Market

"The recent political decisions, including a reduction in rates today, cuts interest rates by central banks coordinated, extraordinary measures of liquidity and official decisions to strengthen financial systems, should help over time to improve credit conditions and encourage a return to moderate economic growth. However, the risks remain on growth. The Committee will monitor carefully the economic and financial developments and take decisions as necessary to promote sustainable economic growth and price stability ", he concluded.

Source: El Economista