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Fed Cuts Rates by 25bp, Statement Neutral With Tinge of Hawkishness
By DailyFX Updates | October 31, 2007
The Federal Reserve lowered interest rates by 25bp to 4.50 percent, giving the financial markets exactly what they wanted and nothing more. The FOMC statement remained virtually unchanged, signaling that any further rate cuts by the Federal Reserve will be gradual. Interestingly enough, the Fed indicated that the upside risks to inflation roughly balance the downside risks to growth. In other words, their monetary policy bias is neutral with a tinge of hawkishness. There was one dissenting vote by Hoenig, who favored leaving interest rates unchanged. The last time a rate decision was not unanimous was in December 2006 and that did little to foreshadow further moves to come, so not much weight needs to be placed on this piece of news. Even though third quarter growth was strong, the Fed is still worried about a potential slowdown in the near term. As a result, they have decided to take another proactive measure to prevent a further slowdown in the
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