So here we are again, almost at the bottom of possible interest rate cuts!  The Fed won't be able to cut much more!  I can reiterate now how nice it is for Ben than Alan raised rates slowly so that he has had the ability to use monetary policy as a tool, as impotent as it might have been.

                                                        

You can see above the last recession in 2001, which wasn't very bad comparatively.  We kept rates low for a LONG time!  By the way, the decision today was unanimous by the FOMC.  TOO LOW?  Hmm, well here are some comments from articles, first the New York Times:

In its statement, the Fed said that, “The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures.” Equipment spending by businesses and industrial output have weakened as economies in other countries have slowed, hurting “the prospects for U.S. exports,” the statement said.

Unlike 2003, the economic outlook is much grimmer this time around. Back then, policy makers were trying to vanquish the last remnants of a downturn.

This time, policy makers face an economy that is sputtering on all fronts — consumer spending, job creation, business investment, housing and possibly even exports — and the downturn has only begun.

The Fed’s biggest weakness at the moment is that the economy’s problems have less to do with interest rates than the reluctance of banks and financial institutions to lend money. Even though the Fed has lent almost $600 billion to financial institutions in the last month alone, banks are still reluctant to lend to businesses or consumers.

Furthermore, unlike England, the U.S. doesn't seem to want to use their power as an owner of the bank to require the money be loaned out.  England stipulates that the money can not be used to buy other banks (as was done with National City).  An interesting time as we have both a Liquidity Trap where Monetary Policy seems to have no effect AND the banks not willing to lend.  In teaching Macroeconomics, these are supposed to be the two extremes, and we are living them both now!!  WOW - great for teaching but hard to live, EH?!?

From Bloomberg.com:

"If the economy weakens further, it may open the door for another 25 or 50 basis points in December,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina.''

Plunging commodity prices, including a 54 decline in the cost of oil from a record in July, have eased inflation pressures.

Fed officials provided their forecasts for this year and the subsequent three years at the two-day meeting. The uncertainties surrounding the Fed's forecast are "unusually large,'' and the economy may experience subpar growth "for several quarters,'' Bernanke told the House Budget Committee on Oct. 20.

"We are in an environment where they lower rates, but then spreads widen so you get no net effect,'' Vincent Reinhart, former director of the Fed Board's Division of Monetary Affairs who is now a visiting scholar at the American Enterprise Institute in Washington, said before the decision. `"We are in a recession.''