A Political Move by the Fed?
By David Wyss
Today's decision by the Federal Reserve to cut the fed funds rate was not a surprise. But the size of the move (50 basis points) and the timing certainly were. S&P expected a rate cut at the January meeting of Fed policymakers -- but only 25 basis points.
The earlier and bigger cut is in large part political; there seems to be no panic about the economy. A rate cut was due, and sooner and bigger is better than later and smaller.
The increased sense of urgency is sending a message to the incoming Bush Administration: The Fed is on the job and will take care of the economy.
Wyss is chief economist of Standard & Poor's