The Fed lopped 50 basis points off its cash rate, taking it to 1%. With real interest rates already well in negative territory I’m not sure this sort of action is really necessary – maybe they want to stabilise consumer confidence or something of the like.
Anyway, our concern here is New Zealand – so what did it do? The TWI went up to 59 from a low of 56 – the $US/$NZ got to $0.59 from a low around $0.54, so it helped to stabilise the FREE-FALL in our currency lately (just before I’ve gone on holiday). Oil prices also bounced back – but still lie at the “relatively” low level of $67US a barrel. For New Zealand this might imply some stability in our commodity prices – this is an essential issue so we can only hope!
All this is a sign that the market has initially taken the rate cut well, with the DOW now up 1200 points from its low about 36 hours ago (*). If this lasts, then we could finally be in for a time of stabilisation – if it doesn’t, who knows 😛
All I know is that the Fed will print as much money as it can to prevent a “Great Depression”, ignoring the future consequences. I will aim to discuss this more next week.