Federal Reserve Cuts Rates To Record Low

The Federal Reserve cuts rate to a record low of zero to 0.25%. Not only did the Federal Reserve make unexpected rate cut but also said it would “employ all available tools to promote the resumption of sustainable growth.” The markets reacted with a strong rally and the Dow ending over 350 points to the positive side for the day. Will this mark the bottom, are markets ready to turn, or just a one day reaction to news?

What changed today that was different from yesterday? Answer: money got cheaper…but was cheap money the problem to begin with? Cheap money is what got us where we are now but people don’t need cheap money; they need money…period. We need liquidity in the credit markets not discounted prices.

What is the Federal Reserve saying about the economy?

Is United States Dollar worth holding? Is Treasuries worth investing in? Personally, I would rather put my money in a high yield savings account rather than in treasuries. Savings accounts are always a safe place to put money, at least to the guaranteed FDIC limit currently at $250,000 per account; but there is a possibility that with treasuries you could lose money.

The Fed also stated that it would leave interest rates at “exceptionally low levels for some time.” This statement should not leave people thinking the economy is in a good position as it symbolizes that things are likely to either get worse or stay at current levels.  The Fed is running out of options as rates can’t go lower than zero; let’s hope they get something right soon!