Bernanke feels the heat as US slowdown gathers pace
30 January 2008
Speculation grew over this evenings FOMC rate announcement, following weaker than expected output growth from the US. Forth quarter annualised GDP weakened to its lowest levels in 5 years, reported at 0.6%; half what the market had expected. The economy had recorded impressive annual growth of 4.9% for the 3 months of July to September. The slide in growth was attributed to the continued deterioration of the US housing sector, as building activity fell 16.9%, its biggest fall in 25 years.
US short term interest rate futures shook off early losses; pricing in an 80% chance that the Fed would lower interest rates by 0.5% this evening from a previous 68% low. The FOMC has already cut US interest rates by 0.75% this month to 3.5% taking total easing from September to 1.75%.