The fallout from the Federal Reserve’s decision to slash its benchmark interest rate to virtually zero is just beginning. The Fed’s move is, of course, unprecedented, a word that’s becoming almost overused in this crisis.
From the New York Times:
Going further than analysts anticipated, the central bank cut its target for the overnight federal funds rate to a range of 0 to 0.25 percent, a record low, virtually bringing the United States to the zero-rate policies that Japan used for six years in its own fight against deflation. The rate had previously been 1 percent, and a cut of a half-point had been widely expected.
If you want to get really nervous, check out the comments from economists. They sound like a scared, nervous bunch.
Here’s Paul Krugman:
Seriously, we are in very deep trouble. Getting out of this will require a lot of creativity, and maybe some luck too.
My favorite so far is Ian Shepherdson of High Frequency Economics:
It is a reflection of an utterly desolate economic picture, which will persist for the foreseeable future as the wrenching adjustment in household finances continues.”
Plus the Fed said it would keep the rate really low, for a long time. Which is, of course, unprecedented. And now that the Fed has set rates this low, it’s essentially out of tools for fighting the recession. Which also is, of course, unprecedented.
I think you get the idea. More wrenching adjustment ahead, as economists say. Sadly, that’s not unprecedented anymore. It’s our way of life now.
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EPA Chief Overruled Calif. Waiver, Too
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