Feds Hope Three Times the Charm

(Read more on the debt and equity markets.)

WASHINGTON, DC-The Federal Reserve bank has cut by one-quarter the federal funds rate to 4.3%. It is the third time in the last few months that the monetary authority has taken a whack to this key interest rate in the apparent hopes of staving off recession. In September, it lowered its target for the federal funds rate 50 basis points to 4.8%. Then in November it lowered the federal funds rate target by another 25 basis points to 4.5%–a move that was accompanied by a warning that this was likely all the market could expect for the foreseeable future as it believed that the upside risks to inflation roughly balanced the downside risks to growth.

Six weeks later, the Fed not only changed its mind about inflation outweighing the risk of recession, but has also thrown out hints that more cuts may be coming if the economy worsens. Many in the commercial real estate industry believe the cut will have only a limited impact on the lending environment, which is currently in freeze mode due to several complex factors.