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U.S. Fed Zero Interest Rate Policy Coming?
Posted By admin On November 1, 2008 @ 5:35 am In Money Watch | Comments Disabled
The Market Oracle 
Saturday, Nov 1, 2008
The Fed did not want to cut the Fed Funds Rate below 2%. And because Congress recently granted authority for the Fed to pay interest on reserves, Bernanke thought incorrectly that he could keep rates above 2%. So much for that academic theory. Now many are wondering if ZIRP (Zero Interest Rate Policy) is coming to the Fed.
The LA Times addressed the question today in The Fed’s rate at zero? It’s no longer a far-fetched idea. 
Just a day after the Federal Reserve dropped its key short-term interest rate to 1% — matching the generational low reached in 2003-04 — the betting is intensifying on another cut.
Trading in futures contracts on the federal funds rate, the Fed’s benchmark, implies a 51.4% probability that the central bank will slash the rate to 0.50% on or before its next meeting on Dec. 16, according to Bloomberg News data.
(Article continues below)
Rate expectations may be cueing off the government’s report today that the economy shrank at an annualized rate of 0.3% in the third quarter. Although analysts figured the economy had contracted in the period, the details were ugly — particularly the 3.1% decline in real consumer spending, the biggest drop since the vicious recession that began in 1980.
The Bank of Japan had to maintain its benchmark interest rate at or near zero for most of the 1999-2006 period, before policymakers finally felt comfortable that the economy was in a sustainable recovery.
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URLs in this post:
 The Market Oracle: http://www.marketoracle.co.uk/Article7061.html
 The Fed’s rate at zero? It’s no longer a far-fetched idea.: http://latimesblogs.latimes.com/money_co/2008/10/will-the-fed-cu.html
 Image: http://www.prisonplanet.tv/subscribe.html
 Full article here: http://www.cnbc.com/id/27452818
 Why the FED’s Zero Interest Rate Policy Hurts the Economy: http://www.prisonplanet.com/why-the-feds-zero-interest-rate-policy-hurts-the-economy.html
 Fed’s Yellen Says Interest Rates May Stay Near Zero for Years: http://www.prisonplanet.com/fed%e2%80%99s-yellen-says-interest-rates-may-stay-near-zero-for-years.html
 UBS faces $1 billion day of reckoning over interest rate rigging: http://www.prisonplanet.com/ubs-faces-1-billion-day-of-reckoning-over-interest-rate-rigging.html
 World markets in turmoil despite global interest rate cuts: http://www.prisonplanet.com/world-markets-in-turmoil-despite-global-interest-rate-cuts.html
 Banks defy Gordon Brown over new interest rate cut: http://www.prisonplanet.com/banks-defy-gordon-brown-over-new-interest-rate-cut.html
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