The stock market plunged yesterday when the Fed announced that it was cutting interest rates by only 0.25%. Wall street wanted a bigger cut. In addition, the Fed gave no indication that it was inclined to drop interest rates further, adding to the stock market’s disappointment.
I wasn’t surprised. The Fed is caught between a rock and a hard place. It wants to lower rates to head off a recession but needs to keep rates high in order to attract foreign investment needed to off-set our staggering trade deficit.
Don’t be surprised if the Fed disappoints next month too.