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Economy in Brief

FOMC at Emergency Meeting Cut Funds Rate to 1.5%; Other Signs of Monetary Ease
by Tom Moeller October 8, 2008

At an emergency meeting, the U.S. Federal Open Market Committee lowered the federal funds rate by 50 basis points to 1.5%. The move was an action coordinated with the Central Banks of Europe and Japan. The Fed indicated that "the move was necessary because of the worsening crisis in global financial markets."

The decision was unanimous amongst FOMC members.

The action by the Fed brought the funds rate to its lowest level since mid-2004. The discount rate was also lowered by 50 basis points to 1.75%.

For the complete text of the Fed's latest press release please follow this link.

In another other sign of monetary easing, the Fed took steps this week that could make trillions of dollars available by lending directly to nonfinancial corporations.

The other tool which the Fed is using to inject liquidity into the market is reflected by the monetary aggregates. Growth in the monetary base has accelerated to 10.9% from 2.0%. M1 growth has risen to 8.3% from 2.3%; M2 growth rose to 7.4% from 5.6%.

Liquidity Crisis from the Federal Reserve Bank of Philadelphia can be found here.

  Current Last September '07 2007 2006 2005
Federal Funds Rate, % (Target) 1.50 2.00 4.94 5.02 4.96 3.19
Discount Rate, % 1.75 2.25 5.53 5.86 5.95 4.18
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