Wednesday, October 8, 2008

We need to give Trichet "political cover?"

Did anyone hear this on CNBC? Bob McTeer said we needed the rate cut to give Trichet cover? Here's his blog post from yesterday.

The Fed Should Coordinate a Rate Cut

The Fed's target Fed funds rate reached 2 percent on April 30, which, given the higher inflation rate this year, is lower in real terms than the 1 percent target rate in 2003. The aggressive Fed easing of the Fed funds and discount rates no doubt helped, compared to not doing it, but it didn't help as much as expected. It's innovative use of special auction facilities seemed to be a better, more targeted, alternative.

For those reasons, and the fact that the lower you go the sooner you will have to start back up, my recent position has been that no further cuts in the Fed funds and discount rates are needed. If more Fed stimulus is called for, it can be provided through one of the special facilities.