In addition to the usual tea leaf reading and other efforts to divine what the Fed will do about interest rates at its next meeting in September, some observers have suggested that the Friday-Monday global stock market meltdown on Aug. 2 and Agu. 5 was used by desperate market speculators to insist that the Fed now really, really has to lower interest rates, by a lot, and immediately, in order bail the whole financial system out.
An article in Financial Times by Barry Eichegreen, Professor of Economics at the University of California, Berkeley (and a research associate at the National Bureau of Economic Research), argues it’s not going work: “The Federal Reserve will not let markets dictate a rate cut.” He says the Fed is not likely to call an emergency meeting or double the expected 25 point lowering of interest rates at their next meeting, but will stay the course.
