Fed Harshly Panned For ‘Panic’ Rate Cut. Market Looks To Biden For Relief

Fed Harshly Panned For ‘Panic’ Rate Cut. Market Looks To Biden For Relief

Judging the Fed's "emergency" rate cut simply on a snapshot of US equity benchmarks' closing levels Tuesday probably doesn't tell anything close to the whole story. The simplistic read on things is that markets were spooked by Jerome Powell's messaging, by the cut itself, or by both. But money markets had already priced in 50bps of cuts for March and speculation that the Fed would move prior to the scheduled meeting was rampant. So, it's not entirely clear why anyone should have interpreted the
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7 thoughts on “Fed Harshly Panned For ‘Panic’ Rate Cut. Market Looks To Biden For Relief

  1. Classic – and if they hadn’t would be panned for not moving fast enough.

    Oh, and the Fed does not know more than any engaged fin pro and in some cases know less. Sorry. They are not omnipotent.

    We are in an old fashion panic. Call it a mild run on the bank. Driven by an known unknown and unknown unknowns.

    We have deaths of young people in cities all over America. Suicide, crime violence, drug overdoses. Accidents, natural disasters. Some areas people do not go to, shop, etc.

    We’ll get through Covid 19 hopefully soon and hopefully with minimal loss of life.

    But I hope we address mental health issues, education to reduce the unecessary and senseless deaths due to poverty, crime, addiction, etc.

    We (the lucky ones) panic now because this could affect us but if we could improve opportunities for those in inner cities, neglected areas etc we could save many more lives, increase economic growth and live in a more decent, just and fair country.

    I hope this makes us think a bit more in the future. I want to live in a world where suicide is not contemplated, violent crime is not needed, and drugs/escapism is not necessary.

    We can save a lot of lives and increase the quality of life if we all demand it.

  2. Omg the fomc if anything waited too long. A bank run was rolling, still is perhaps. Repo was oversubscribed. The hard money crowd has been talking dry powder for years. Really that is a load of bull, which I predicted would come out in an earlier comment on this blog. What is the fed supposed to do? Collapse the system? Next is the balance sheet, no choice here…Yes Powell’s communication is woeful. The other very regrettable foolish straw man is the fomc cannot cure the virus. That isn’t the point. The Fed should try to help prevent a recession or at least soften the blow. A significant slowdown is almost guaranteed now. Cuts now might soften the blow. What would the critics suggest? Wait?

  3. “We know central banks cannot directly reverse that, nor can they force people into shopping malls or onto planes”, Innes went on to say, adding that while “the debate will rage on about the merit of the rate cut… from my perspective, the swift and decisive move was a necessary measure to support the equity markets which were entering a death spiral and demanded an urgent response”.

    The only problem with that last line is it is not the mandate of the Fed to support equity markets.

    1. But the repo market indicated a bank run. There has not been a corporate bond issued in over a week. Credit spreads are rapidly blowing out. The safety and soundness of the banking system could come under fire if they do nothing to help. Forget the equity market- financial conditions are tightening in the credit market and a bank run was (maybe still is) forming. The Fed likely will be expanding the balance sheet and increasing the duration of its assets as well- we are not far off from that. As much of a fan of the idea that we likely need the right kind of fiscal stimulus (spending on infrastructure, health and education and tax cuts for the lower half of the income strata to stimulate spending NOT corporate tax cuts and defense spending which have low job creating effects).

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