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Wednesday, December 17, 2008

Virtual Zero

The Federal Reserve put its money where its mouth is, wrt making all efforts to kick start the economy, by cutting interest rates to between zero and 0.25% yesterday.

This puts pressure on the laggardly Bank of England to do what it should have done before, and cut rates further. Ironically it seems that the Bank of England did consider a larger rate cut, but was worried about the destabilising effects of such a cut (source The Times).

Does the MPC not realise that the recession and collapse of the banking system is in itself destabilising?

The Fed's action has made fools of the MPC.

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