Fed’s change of priorities

Posted by | August 18, 2007 | Current Affairs | No Comments

The Fed’s dont seem to be worried about inflation anymore, atleast for the time being. This was made clear on Friday, when Discount rate charged on direct Fed’s loan to the banks were reduced to one half of the percentage. The Fed has kept its conern over Inflation aside and instead would probably cut its target Federal Fund rate to support growth. With the credit market situation having all power of slowing down the economy, it has only become important for the Central Banks to be ready for sucha situation and act accordingly.

The requirement for a rate cut has been the want of many analyst and experts alike, like Jim Cramer. The discount rate will only lower the cost of emergency borrowing by various institutions. Wherase in case of Fed. rate cut, all the banks cost of funds are affected. Many feel that the need of the hour is a Fed. rate cut.

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