So they went with 75 basis points (that’s three-quarters of a percentage point to you and me). Big, but slightly less than markets were expecting. Which would seem to mean that Bernanke & Co. are convinced that the economy really is in a recession now, but would prefer not to be seen as entirely doing Wall Street’s bidding. Or something like that.
I’m generally in the camp of those who believe inflationary pressures are starting to recede as the economy slows down–which means the Fed has some leeway for cuts like this. Yeah, the dollar may drop some more in the wake of this move, but imports just aren’t a big enough part of the U.S. economy (17.3% of GDP) for a falling dollar abroad to necessarily mean inflationary disaster at home. Petroleum imports, by the way, now account for 16.4% of total imports of goods and services. That’s up from just 4.5% a decade ago. But it still amounts to only 2.8% of GDP.
Update: Hmmm. The dollar’s been rising since the Fed announcement.
