(Yes, another "dammit" post.)
I guess when everybody's expecting a cut in the federal funds rate, it just has to be cut. The expectations were for a cut between half-a-percent and one percent, so the Fed split the difference. Me, I'm with Fed governors Fisher and Plosser (Dallas and Philly, respectively), who favored a smaller cut. The two were characterized by the Times as "hawkish" on inflation.
Hawkish? I'm not hawkish. I'm scared.
The discount rate also was dropped by three-quarters, which is a good thing because the Fed may be the only place left for American banks to acquire capital. Low interest rates are sure to mean low interest by foreign lenders, especially when the dollars that get paid back will be worth so much less than the dollars invested. If I were the Sheik of Araby with a vault full of petrobucks, I guess dollars might be all I had to lend, though -- making the U.S. the only game in town. On the other hand, at the next meeting of OPEC, the notion of valuing a barrel of crude in euros rather than dollars might seem like a pretty good idea.