Archived IMT (2008.10.29)

The Fed cut its fed funds rate by 50 bps to 1.00%, adding to the 50-bps made less than a month ago. The central bank is now in full pursuit of its full employment objective, while extending its policy U-turn from its inflation bias.

For the first time in the current easing cycle the Fed makes no mention of labor markets in the 6-paragraph policy statement, thereby, reflecting the evident fact that the economy is in recession. The emphasis on slowing consumer expenditure in the same paragraph underscores the fluidity of the transmission mechanism from falling asset markets and dried up credit to households. Carry trades are curtailed once again as equities move to the downside. MORE ANALYSIS TO FOLLOW SHORTLY.