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Central Bank - FOMC

March 18, 2008

Date / GMT		ACM	Consensus	Current Rate
18th / 18.15	Federal Reserve	2.00%	2.00%	3.00%

	Given the unprecedented move by the Fed over the weekend we are in line with market consensus into now pricing a 100bp cut in fund rate to 2.00% on Tuesday. The downward adjustment to the discount rate during an emergancy meeting underlines both the gravity of the financial crisis and the Fed’s resolve to pull out all the stops to prevent the situation from spiraling out of control. Perhaps the most disturbing aspect of the emergency move was that the Fed felt it couldn’t wait 48hrs when the market reaction might have been more positive then skeptical. The panicked move lends itself to speculation that the Fed knows something the market doesn’t (maybe about the rumors regarding Lehman). Clearly the recent rash of weak economic data such as the fall in payroll and retail sales as well as today’s industrial production figures point to a recession which warrant an aggressive action by the Fed. The market will be particularly keen on the accompanying comment to provide the justification for the Fed’s unorthodox approach to monetary policy - on the fly to say the least.

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