The Federal Open Market Committee (FOMC) met on the last two days of January and decided to reduce the federal funds rate target 50 basis points to 5.50 percent and the discount rate to 5.0 percent. They said economic conditions were weak and maintained their bias towards an easing. They were particularly concerned about the erosion of consumer and business confidence along with more sluggish retail sales and a contracting manufacturing sector.
This was indeed an aggressive move by the Fed, making for 100 basis points of cuts in one month. We have to go back to 1982 to see such a dramatic move! The accompanying statement sparked hope the Fed would lower rates again before the next FOMC meeting on March 20. The financial markets soon had their hearts set on another inter-meeting rate cut.
Unfortunately, the employment report was not weak enough to justify such a move. Market players were disappointed and had to scale back expectations, though the majority of economists are still calling for a 50 basis point rate cut at the March meeting.
Jobs disappoint, not weak enough for aggressive Fed
