Tuesday, September 18, 2007

Fed Cuts Discount Rate

The Federal reserve cut the discount rate by a surprising 50 basis points today (most people were only expecting 25 basis points). You can see more detail on bankrate.com's fedwatch page. I was sitting front of a live market feed when the announcement came out. I highly recommend this if you follow the market at all. It's one of the few things you're pretty sure will make stocks move, happens in the middle of the day, and you know well in advance that a rate decision (one way or another) is coming at that time. Stocks soared and volume took off.

I don't have strong feelings one way or another. I thought they might cut 50 basis points due to all of the doom and gloom financial stories that have been going around lately. I hoped they wouldn't lower the rate at all because it seems like people have this crazy expectation that investments they own shouldn't have to go down in value and that Fed rate cuts exist to protect them from losses.

Anyway, my advice doesn't change: keep contributing to your retirement accounts.

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