FOMC Adopts Target Range of Zero to 0.25%
December 16, 2008
Today saw the FOMC announced a target range for the Fed Funds rate of zero to 0.25%, the first time it has adopted this type of monetary control. In essence the Federal Reserve have just discounted rates by a minimum 0.75% while adopting an aggressive approach to managing monetary policy. The accompanying statement was particularly negative in sentiment with underlying tone being one of continued pessimism. This was evident in the statement that “Overall, the outlook for the economic activity has weakened further.” What spurred the equity market into life however was the declaration that the Fed will “employ all available tools to promote the resumption of the sustainable economic growth and to preserve price stability.” As noted US equities rallied on the news however the US Dollar did not fare as well with a drop of 4.25% on a trade weighted index.