Tuesday, January 22, 2008

Rate Cuts and the Dollar

Today the Federal Reserve Bank cut the federal funds rate by 75 basis points. In all the time I've been paying attention (since college) I have never seen a cut this big. Cutting the fed rate is supposed to increase the money supply by encouraging people to borrow. On the down side it can carry inflation along with it, and the dollar did in fact trade down today. What's crazy is that even with a cut like this the DJI and S&P 500 closed down! If a cut like that can't increase investor confidence, then maybe a cut like that won't bring inflation along with it. And if there is an ominous global recession on the horizon, maybe we won't see the dollar decrease much because other central banks will cut their rates too. It'll be interesting to see, so let's start documenting it! Here is a list of exchange rates:

GBP: 1.9577
CAD: 0.9758
EUR: 1.46089
AUD: 0.868402
JPY: 0.009409

I'll keep track over the next while to see what happens.

1 comment:

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