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The Fed's got to cut rates. There is not question.

How much?

I think what we need to see is, a process of cutting rates. So it's less about how much today and about the, holding up a hope of more rate cuts to come. What I'm expecting is a quarter points of the Fed funds rate today, half of a percent of the emergency discount rate that's where banks go when they were in difficulties. But clearly, a statement which says more is going to come, don't worry, guys, we will keep on cutting.

And what's their key focus right now? Is it trying to get the banks to reduce their inter bank lending rate? Is on that the key focus right now?

That's part of the process, but it's slightly wider than that. Because of course what you've got at the moment is actually a momentary policy tightening. You are a consumer. Your interest rate hasn't come down three quarters of a point long with the Fed funds rate. If you are a consumer, the chances are your interest rates going up because banks tightening credit standards, and raising the cost they have passed on to the consumer. So what the Fed is concerned to do is to stop that process of monetary policy tightening.

Oh, whatever the rate side? The other problem is that the banks are just reducing their lending generally, and they won't lend to anyone with any sort of risky background. So that's gonna cause problem itself. There is nothing that the Fed can do about, is that?

No, there is not much that the Fed can do about that, at the margin, we are, I think going to see less credit. Now I'm, we can go back to Japan in the 1990s. It doesn't matter how much you cut rates. You can't of course force banks to lend if they don't want to. But in actual fact, one of the things we concern about is not so much new borrowers, but existing borrowers who have got adjustable rate debt. And where the interest rates go up and down, those are the guys who are vulnerable in this current environment, and the Feds got to try and limit the damage to them. Because of course there are far more existing borrowers than there are potential new borrowers.

Are you mentioned that the discount rates which is the rate that you say the, the banks go to the Feds asking for money if they really need it. But that’s kind of epidemic, isn’t it? Because once people start using or once banks start using that facility, there is a huge stigma attached to that, so they can avoid that, anyway, aren’t they?

Well, there is a stigma, and particularly here in the United Kingdom, borrowing from the Bank of England that has such a huge stigma. In the States it will…

// examples.

Precisely. In the United States it’s less so, and there has been more willingness to borrow from the discount window in the United States. So, I think actually as the credits crisis of confidence continues, banks will get over the social stigma and recognize that, hold on, here’s someone prepared to lend his money. We might as well take advantage of it, and that will then help to at least smooth over some of the problems in the market.

Quote:

引用第3楼恐怖骑士于2007-12-20 10:17发表的  :
弱弱问一句LZ,这个是与  英央行降息  对应的吗?

美联储降息的原因是因为8月时爆发的次级债危机，是市场上本来过剩的流动性问题变成了流动性短缺，这和英格兰银行降息的原因是一致的，可以说这是西方发达国家的央行应对次级债问题的一种协同的做法