No change, a 25bp cut or a 50bp cut to the 5.25% Fed Funds rate: these are the options facing the Federal Reserve’s policymakers in Tuesday’s FOMC meeting, says the FT. Their choice will determine whether credit markets stabilise, whether the US housing downturn becomes a recession and whether inflation is rekindled. It will define Mr Bernanke’s term at the Fed. “This is a meeting that matters”. The best option, in the FT’s view, is a 25bp cut. That given, the statement accompanying it will be crucial, it adds. In it, the Fed should make only the most oblique of references to the credit markets. Any suggestion it will cut rates until they stabilise is “a hostage to fortune and a spur to moral hazard”.

This entry was posted by Gwen Robinson on Tuesday, September 18th, 2007 at 5:50 and is filed under Capital markets. Edit this entry.