More Interest

MORE INTEREST....Just a note on interest rates: yesterday evening the Fed reduced the overnight lending rate from 4.25% to 3.5%, a cut of nearly a fifth. However, those are nominal rates. Adjusted for inflation, the rate dropped from about 0.15% to -0.6%. You can't really express that as a percentage cut, but it's pretty significant. For the first time in a while real interest rates are negative — and as near as I can tell, markets around the world barely even paused to notice it. Yuck.

On the other hand, a friend relayed news last night that his relatives in the finance biz "are expecting about a 500+ point drop in the Dow tomorrow and say that anything under 300 should be considered a victory." At noon, the Dow is only down 150 points, so maybe the Fed will be able to declare a moral victory of sorts after all when the day is finally done.

  • CBSNews

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