By Evelina M. Tainer, Chief Economist, Econoday
5/18/01

Several key economic releases were reported this week. But they were overshadowed by the FOMC meeting on Tuesday, May 15 when the Fed cut the federal funds rate target and the discount rate by 50 basis points. This brought the funds rate down to 4 percent and the discount rate to 3.5 percent. The bond market didn't immediately take kindly to the news because bond investors are becoming increasingly worried about the potential for inflationary pressures. A friendly CPI report did take the sting out and bond markets rallied in subsequent days. The stock market rally was also delayed by a day because the Fed cited "a weak economy" as a major reason behind the rate drop. Later reports alleviated fears all the way around.