http://money.cnn.com/2008/12/16/markets/markets_newyork/index.htm NEW YORK (CNNMoney.com) -- Stocks surged Tuesday after the Federal Reserve cut a key short-term interest rate to the lowest level on record, and signaled it had more tools available to help the economy as the recession stretches on.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aafQgexzAGXk&refer=home Dec. 16 (Bloomberg) -- The Federal Reserve cut the main U.S. interest rate to as low as zero for the first time and shifted its focus to the amount and type of debt it buys, seeking to revive credit and end the longest slump in a quarter- century.
http://www.federalreserve.gov/newsevents/press/monetary/20081216b.htm
Release Date: December 16, 2008
For immediate release
The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.
Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.
Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.
The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco. The Board also established interest rates on required and excess reserve balances of 1/4 percent.
http://www.nytimes.com/2008/12/17/business/economy/17fed.html?bl&ex=1229576400&en=9d5b8715e8bcd55a&ei=5087%0A WASHINGTON — The Federal Reserve entered a new era on Tuesday, setting its benchmark interest rate so low that it will have to reach for new and untested tools in fighting both the recession and downward pressure on consumer prices.
4 cast says:
Tue Dec 16 19:40:00 2008(EST)
* 17 Dec 08: 00:40(SGA) - FX NOW! EUR/GBP, GBP/USD Flows - Cable sales, but, its getting a more dangerous game.
Some cable sales being seen, with a German name noticeable, though at this stage they appear to be somewhat tentative. Although sterling cannot be described as anything but 'weak' in terms of most of the crosses, short covering on cable has - and can continue to have - rather painful consequences, and as such we would at this stage be a little hesitant ourselves in jumping on the sales bandwagon. On EUR/GBP, where, so far, the easy call has been north, though we will inevitably hear growing suggestions that parity is coming, especially in the media, we would also be inclined to step back a little, and would note our technician's call that though the 0.91 level is calling, it's a cut and run on a downside break of 0.8875. C.F.
* 17 Dec 08: 00:21(SGA) - FX NOW! EUR/USD, USD/CHF Flows - Wither the dollar?
Again thin and gappy markets, but with just a little (unsurprising) profit-taking after the initial squeeze appears to have run its course. With order books almost certainly cleared, and stops stopped, we now await the next push. The technicians will, of course be concentrating on buying on dips, and the tacticians, who yesterday were calling for the USD to be the weakest currency at least for the first half of 2009 will be re-evaluating, and perhaps thinking that a lot of weakening has already been done! But in the meantime, we look for a relatively solid base near 1.40 (though tech studies allow for a pullback to 1.3940), and a push to 1.4185, a 50% retracement level, which, if nothing else, is at least a convenient peg to hang the next EUR/USD rally on. C.F.
