Fed Interest Rate: The Fed Cuts 0.75%

March 18, 2008

Breaking news! The Fed cut interest rates by 0.75%, putting the Fed Funds rate at 2.25%.

The Fed had to step in with a large rate cut–clearly it's the economy, not inflation, that's the Fed's biggest concern right now. Yesterday the 3-Month Treasury Bill yielded 1.11%, and it even fell below 1% at one point–that's something we haven't seen in 50 years! It's clear that there's a lot of fear out there.

We'll see how the Fed's interest rate cut plays out for the U.S. dollar and the credit crisis. As I mentioned in my new April Blue Chip Growth issue, lower interest rates will cause the U.S. dollar to weaken even further. Fortunately, our Blue Chip Growth strategy employs a three-pronged approach that allows us to profit from the dollar's weakness, soaring oil prices and higher commodity prices.

Just don't think the market's out of the woods yet. We got news today that producer prices rose 0.3% in February, and the core rate was up 0.5%–economists were only expecting the core rate to rise 0.2%, so it's clear that the inflation monster is rearing its ugly head. We'll need to keep a close watch on how the latest federal interest rate cut affects these inflationary forces, and just what other tricks the Fed might has up its sleeve in order to help our broader economy.

But for now, I'm very happy that the Fed has, once again, come to the market's rescue with today's big rate cut.