The federal reserve reported today on the status of the economy and issued a federal funds rate cut of 25 basis points or 1/4% to 4.50%. This cut has been completely priced into the market and the recent price action on the Dow and treasuries suggests that traders were expecting, or at least hoping, for a larger cut of 50 basis points.

The credit market turbulence continues as Merrill Lynch took a $7.9 Billion writedown this quarter, and reported its largest loss in company history, to cover its part in the subprime mortgage backed securities fiasco.

This drop in the fed funds rate will also be putting upward pressure on oil prices, which I think will hit $100-110 per barrel sometime within the next 30-60 days. The fed used some interesting wording regarding potential strength in the economy in their statement and will leave people guessing until the next meeting. There was one dissenter on the decision to lower rates and that was Thomas Hoenig from the Kansas City regional fed bank, otherwise the vote was 9-1 in favor of the 25 basis point cut.

[tags]federal reserve, rate cut, federal funds, discount rate, interest rate, shaun carter, ben bernanke, money, investing, saving, credit, oil, merrill lynch[/tags]