FXstreet.com (Barcelona) - The Federal Reserve has cut Funds rate by 75 basis points to 3.5% on the weakening of the economic outlook and the downside risks to growth, according to the Fed's statement.
The Federal Reserve affirms that while strains in short-term funding markets seem to have eased somewhat, broader financial market conditions have continued deteriorating, and credit conditions have tightened further to businesses and households, besides incoming information shows a worsening of the housing market plus a deterioration of the labour market.
According to the committee, inflation might moderate in the next quarter, but prices should still be closely monitored.
Downside risks to economic growth remain, according to the Fed statement, thus the Committee will continue to assess the effects of financial and other developments, and will act in firm and timely manner to address those risks.
According to Ian Sheperdson, Chief U.S. Economist at High Frequency Economics, Ltd, the state of the markets as prompted the Fed's decision: But there can be little doubt the Fed would have waited until the meeting next week if it had not been for the state of the markets.. Furthermore, Shepherdson does not discard another move next week: After this action we do not expect a further move next week - though it can't be ruled out - but we do think they will ease by another 50 at at the March 21 meeting. The economic data will continue to worsen; this move is not an instant fix. The economy is still staring recession in the face, but at least the Fed now gets it.