Cut, Cut, Cut!

Bloomberg
reports that the Fed over the weekend cut the discount rate 25 pts but also on Tuesday might cut rates as much as 1 pt!

The Fed lowered the discount rate to 3.25 percent from 3.5 percent, narrowing the spread with the federal funds rate to a quarter point from a half point. From tomorrow, primary dealers will be able to borrow at the rate under a new lending facility, to be in place for at least six months, the Fed said.

The actions are ``designed to bolster market liquidity and promote orderly market functioning,'' the Fed said. ``Liquid, well-functioning markets are essential for the promotion of economic growth.''

Investors expect the Fed to lower its benchmark rate by as much as a full percentage point, to 2 percent, when policy makers meet March 18. That would exceed the 0.75-point emergency reduction on Jan. 22, which is the largest cut since the overnight interbank lending rate became the main tool of monetary policy about two decades ago.

Discount rate definition

benchmark rate definition.

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3/4th fed funds rate

New benchmark 2.25%

plus a 3/4 pt cut on the discount rate.

I don't see how this helps anything beyond this rigged paper economy game. But bad debt, worthless assets are worthless assets.

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