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The Fed Yielded to Expectations
In line with the market expectations, the U.S. Federal Reserve trimmed the rates by 0.25 percent to 4.25 percent Tuesday. Its Chairman Ben Bernanke apparently fears the recession much more than accelerated inflation. Dow Jones closed down yesterday on general disappointment of investors that had hoped for greater generosity.
FOMC reached the decision to trim the rates by 0.25 percent to 4.25 percent at 10:15 p.m. MSK. The given reason refers to economy slowdown blamed on the stronger adjustment on housing markets and weaker consumer and business spending. The futures on the rate gave the 100-percent probability of 0.25-percent reduction and 40 percent was for reduction of 0.5 percent.
So, the best hopes of investors didn’t materialize, as the Fed ultimately preferred to cut rates modestly instead of slashing them. As a result of general disappointment, Dow Jones fell 1.5 percent hardly the news had been announced. As to Russia, the market movement here was also driven by the rates rather than by politics.
The market gained just 0.52 percent after First Deputy Prime Minister Dmitry Medvedev announced that Vladimir Putin should be the PM once a new president was elected. But the growth was 3.5 fold more than that on Monday, when four parties nominated Medvedev the presidential candidate and he was favored by Vladimir Putin.
www.kommersant.com
All the Article in Russian as of Dec. 12, 2007
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