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Including the Kitchen Sink

One thing often overlooked by casual market observers is the enormous set of policy options available to the Federal Reserve, and how they can be used to ameliorate the credit crisis. Sure, virtually everyone is familiar with the federal funds rate, which Fed members decided to cut by 50 basis points this morning in concert with cuts made by the ECB and other central banks. However, the funds rate is only one tool in the Fed's toolbox that it can wield, particularly during a crisis. James Hamilton at Econbrowser provides an informative and detailed account of all the Fed has done so far. Robert Pozen has an idea for the next (and possibly last) course of action the Fed may need to pursue if credit markets don't thaw in response to all that has been done so far.

Posted 10-08-2008 8:22 PM by Brian Lego
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