Federal Reserve surprises the markets with less than full percentage point cut

I was mildly surprised that the Federal Reserve FOMC only cut interest rates by 0.75% rather than by a full percentage point, but only mildly. Two FOMC members voted against the move, stating that they would have preferred an even smaller cut. The bottom line is that the Fed made a reasonable move. People can always debate whether the Fed erred a little too high or too low, but we should be content as long as they are in the right ballpark.

I did notice that the odds of the full point cut had declined to a little less than 100% this morning, probably due to the Producer Price Index report which showed rather strong inflationary pressures building.

 -- Jack Krupansky