Fed to follow up emergency cut with more action

In a dramatic turnaround from last week, when even the most dovish of Fed officials didn’t appear to support any additional policy loosening, the Fed announced an emergency inter-meeting 50bp rate cut this morning – lowering the fed fuds target range to between 1.00% and 1.25%. We now expect the Fed to follow that reduction with an additional 25bp rate cut at the FOMC meeting scheduled for the middle of this month.