Despite some inmprovement in the economy (but not in the job market) the Federal Reserve is not ready to start raising interest rates. The Fed plans to keep interest rates at their current very low levels (0 to .25%) for an "extended period" of time. Take a look:
Stocks tanked today despite the recent bailout and the likelihood of a interest-rate cut. The Dow sank over 500 points and the Nasdaq continued to get beat-up by the ongoing bear market. Here's today's ugly numbers
Dow: -508.39 points (-5.1%) to 9,447.11
Nasdaq: -108.08 points (-5.8%) to 1,754.88
S&P 500: -60.66 points (-5.7%) to 996.23
Marketwatch quotes Tony Crescenzi, chief bond market strategist at Miller Tabak & Co., who says investors are "clamoring for interest rate cuts."
Equities remained sharply lower as minutes from the Federal Reserve's last formal meeting revealed rate cuts were put on the table at the mid-September gathering, and after Fed Chairman Ben Bernanke in a speech opened the door for a possible interest-rate cut soon.
"Despite its scale, the Federal Reserve's massive injection of financial liquidity of late and its announcement of a new facility that will purchase commercial paper is not registering with investors who appear to be clamoring for interest rate cuts instead," said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.
As expected the Federal Reserve has decided to leave interest rates unchanged. The New York Timesreports that the Fed seemed to back away from its concerns about inflation which is surprising considering how much inflation has been rising over the past twelve months. It could be that lower oil prices are helping to ease the Fed's inflation worries.
Emphasizing the dangers to the economy, the Fed said in its statement that a substantial easing of interest rates in recent months, "combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth."
By a vote of 10 to 1, policy makers declared that inflation remained "of significant concern" - a description that seemed to give less importance to the inflationary risks of keeping rates low than the policy makers had at their meeting on June 25. The lone nay vote came from Richard W. Fisher, president of the Federal Reserve Bank of Dallas, who sought an immediate increase in the federal funds rate, a short-term rate that influences the cost of mortgages, car loans and a host of other consumer credit.
Mr. Fisher has maintained for weeks that the danger of an inflationary spiral warrant a rate increase even at the risk of further slowing a damaged economy.
But in a nod to Mr. Fisher's concerns, the policy makers' statement gave considerable recognition to his point of view that "the upside risks to inflation are also of significant concern."
"Inflation has been high," the statement also said, "spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain."
After stocks fell again because of credit concerns CNC's Jim Cramer gave an intense and passionate outburst about the market and the Fed during an interview with Erin Burnett. Cramer is calling on the Fed and Fed Chairman Ben Bernanke to lower interest rates. Here is a video clip of Cramer's outburst.
You can also see the video here on CNBC. The Big Picture has a transcript of Cramer's live rant and says it is "destined to become a classic Wall Street legend." It seems like it already has. A lot of blogs and media outlets are covering it. Seeking Alpha calls it the rant "heard around the world." Here's another take on it from TheStreet.com. See also The Mortgage Insiders, Investment Postcards, Ugly Chart, AllDay and InMan Blog.
Adding a little justification to Cramer's legendary rant the subprime problems expanded internationally and the market fell into additional trouble on Thursday.
