Interest rates

As if the weekend events (Lehman Brothers, Merrill Lynch, AIG) weren’t enough excitement for traders, the Fed Open Market Committee handed them another surprise after its meeting Tuesday by holding short-term rates steady instead of cutting the Fed Funds rate as many expected in the wake of the latest financial turmoil.

  • Is the Fed gambling that the latest round of financial problems will work themselves out on their own?
  • Can the financial system survive another weekend of shocks without further stimulus?
  • Did the Fed leave the door open for an interim interest rate cut if market conditions deteriorate?
  • Did the latest PPI/CPI figures dampen inflation concerns?

Have a great week!