Tuesday, September 16, 2008

Fed 2% Pause Continues

The FOMC kept overnight rates at 2% today. The Fed has previously suggested its anticipation that they would hold at 2% throughout this year and slowly increase starting next year. Given recent market turmoil, general expectations shifted toward the possibility of a cut. I wouldn't have been surprised if they had cut, and if current deflationary trends continue I anticipate they will cut, but for once we see a hint of backbone against the interests of Wall Street. Here's my thinking: those who are going to be saved—i.e. the major banks—are already in the lifeboat. Those not part of the old boys network will be left to drown, starting with Lehman. AIG remains to be seen.

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