To no one's surprise the Fed lowered the overnight fund rates today, relieving some investors' fears about an imminent declining economy. The Fed stated after the decision that apparent risks to the financial markets from the summer's credit crises have eased.
This, to me, was a surprising comment considering that we may not have seen the worst of the mortgage market fallout yet.
The Fed's comments about inflation indicated that the central bank would be able to return to somewhat more normal worries in the coming month and focus less on the upheaval in the credit markets than when it met last month.
In addition to lowering the federal funds rate, the Fed also trimmed the discount rate by a quarter-percentage point to 5 percent.
Questions remain, however, given the comments by the Fed about the credit crisis easing. Has the Fed decided to abandon the housing and credit crisis to heal itself? And should they, given the fact that the rest of the economy remains strong?