Big news this morning! The Fed announced a 3/4% CUT to the Fed Funds Rate reducing it to 3.5%. The discount rate was also reduced .75% to 4%. I personally suspect this was a move the react to the global stock-market sell off. Look at the numbers across the world overnight:
- Honk Kong was down 8.7%
- Australia was down over 7%
- Japan was down 5.7%
- Trading was HALTED in India after it fell 10% at open.
Do you think the US was worried about a huge sell off? Of course it was! I think this was an emergency move to avoid an even larger sell off in the US. A cut was expected later on this month, but I don’t think anyone was expecting .75%.
At 10am CST, the DJIA is down 170 points. Mortgage backed securities are up 28bps. Rates might start swinging the other direction as fears of inflation start to rise.
A couple really interesting factoids of this whole move:
- This is the first Fed Funds Rate (FFR) move outside of a formal meeting since 9/11.
- This is the deepest FFR cut since 1984!
I also wanted to point out that if you followed me on Twitter, you would have known about the global sell off over the weekend and this wouldn’t have been AS MUCH of a surprise today.
For the complete Fed statement, check it out here.
In the meantime, look for ‘Quick Updates’ on the right side of the page. Hold on, it’s probably going to be a wild ride today. My eyes are glued on CNBC.
