Open Thread: A Stealth Fed Rate Cut?

Today’s absurdity was this rumor circulating that the Fed was arranging a secret meeting.

Than the rumor came that they were going to cut next week.

But my favorite rumor du jour was passed along by the WSJ:  You see, according to some of the more cleverer Horse Central bank  Whisperers out there, the FED HAS ALREADY CUT RATES.

"The Fed’s primary weapon is its influence over the
federal-funds interest rate, at which banks with excess reserves lend
to banks that are short reserves. When demand soared last week and the
market interest rate rose above the target, the Fed pumped in extra
cash. But in times of turmoil, it can be difficult for the Federal
Reserve Bank of New York to fine-tune its interventions. In recent
days, the rate has traded well below the Fed’s target at some points of
the day — even coming close to zero at times. That has prompted some
in the markets to deem this "a stealth Fed easing."

That was the reason given for the comeback today. Not that we had sold down 1,500 Dow points in less than a month, but (shhhhh!) whisper after me: "Fed cut."

Stealth cut, or absurd rumor?

What say ye?


Update: August 17, 2007 9:38am


FOMC statement

Federal Reserve Board
discount rate action


Has the Fed Secretly Cut U.S. Interest Rates?
Markets Wonder As Federal-Funds Rate Lingers Below Target
DAVID WESSEL in Washington, LAURENCE NORMAN in New York, ENDA CURRAN in Sydney and MICHAEL S. ARNOLD in Tokyo
WSJ, August 16, 2007 2:25 p.m.

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