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50bp Right On Schedule

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by Felix Salmon
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Jan 30 2008 12:00am EDT

50bp, Right on Schedule

So it was to be 50bp after all: Ben Bernanke has proved himself capable of following through in the two-step rate cut he initiated a week ago, even in the knowledge that cutting 125bp over the course of little more than a week might seem a little panicky.

Bernanake seems to be good at keeping the rest of the voting members of the FOMC on board: while there was one dissenting vote this time, it came from Richard Fisher, and so far each of the four sole dissents has come from a different regional Fed president. The Fed signalled too that there might be further cuts to come; there's certainly space for a few more cuts with the Fed funds rate now at 3%. Willem Buiter's dream notwithstanding, there's no chance of any rate hikes in the foreseeable future.

The stock market got what it wanted, and rose in relief that the feared 25bp cut didn't happen. But what would really help stocks would be some economic growth, in the wake of the anemic 0.6% figure printed in Q4. And that doesn't seem particularly likely right now.

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