(Extra) March Rate Cut

March has been troublesome month in an unstable time. Several negative economic indicators, the fall of Bear Stern, and 74% American believe the nation is now in recession. Many have expected at least a 75 basis points cut from the Federal Reserve to boost the economy. Nonetheless, the previous Uncle Sam $200billion package only stimulates the market for a day. So what can 75 basis points really do?

The internal dispute news from the Fed leads me to guess the possibility of the two contrary options in today’s meetings: 1) catching the knife with their bare hands, 2) letting go of the falling knife. For option one a huge rate cut is a must, but for option two the Fed may only cut 50 basis points or less. It will be interesting if the Fed take a bolder move and increase rate. Of course the former option is much more possible than the latter. Either way the Fed is trying to catch falling knives. However, a huge rate cut leaves less wiggle room for the Fed and creates more inflation which might lead US towards the same track of Japan in the early 90s.