Smith Faculty Opinion Article	September 18, 2007
By Dr. Peter Morici, Professor of International Business E-MAIL WEB SITE

Fed Cuts Federal Funds and Discount Rates by 50 Basis Points

Today, the Federal Reserve Open Market Committee cut the target federal funds rate by 50 basis points to 4.75 percent and lowered the discount rate by the same amount to 5.25 percent.

Clearly Bernanke sees weakness in credit markets affecting the broader economy. Cutting both the fed funds rate and discount rate by 50 basis points is strong medicine, especially considering Bernanke's conservative inclinations.

Bernanke is much more incline to errors of omission than errors of commission. Information from the regional Federal Reserve Banks must indicate that turmoil in credit markets is strongly affecting business spending and taking the economy to the brink of recession.

My bet is that this move, along with other rate cuts later, as needed, will avert a recession.

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission. ►More Faculty Opinion Articles