The cut in the FF rate to 3.75% will probably not require the FED to pump bank reserves up that much. The banks have already been trading reserves at rates there and lower at times during the last few weeks. T-bill rates are already down around 3%. Libor is 4% for 3-month money. We need to wait and see what happens to bank reserves and M1 before we reach a verdict. The FED has a recent history of following, not leading the market.
Stocks opened on a gap down. As so often happens, they have rallied back to fill in that gap. Their usual pattern is next to sag back toward the lows, then have a period of stability or even small rally for awhile. Eventually, however, those lows are again broken as the bear market resumes.
10:21 am on January 22, 2008 Email Michael S. Rozeff
