Rates are now in the US down to 3.00% down from the first time since they adopted the easing policy in September of last year, while the discount rate is just 50 basis points above residing at 3.50% where the spread is tight ensuring the feds helpless attempts to restore liquidity; the shift in policy was taken after the housing slump deepened and spurred the mortgage market to collapse. The sluggish fourth quarter GDP reading released earlier the feds worries about the economy’s headings seem justifies as they are utilizing all means possible in hopes to create a bottom for that ever lasting slumping housing market.

The feds clearly has adopted a new stance as they underwent the drastic change from hawkish to extreme DOVISH; as the statement stated financial markets remain “stressed” while credit tightened further, they surely altered their stance on the economy and the housing sector saying “recent information indicates a deepening of the housing contraction as well as some softening in labor markets.”

This quote from the statement highlights the Feds position on the economy as they are not at the point willing to mind inflation, as they see it to moderate, while they monitor price stability; the statement reads, “Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.”

“Substantial easing” it is, Mr. Bernanke said and now he delivers, even if at this point in time after the Fed shed 75 basis points nine days ago in an emergency meeting, they couldn’t disappoint markets at this stage as they sincerely need the lagging confidence. The decision though was not unanimous as Richard W. Fisher preferred no change in the target.

Markets surely reacted at the announced rate despite it being expected and locked; greenback’s bearish journey was extended and is falling against majors. The euro inclined to as high as $1.4879, while the pound gained back some momentum to reach nearly 1.9950s, the yen on the other hand strengthened slightly and now trading around 106.90s.