Desperate measures: … The deepening gloom about the economy may well warrant such an aggressive response. But the timing is puzzling. There is more than a whiff of panic about slashing rates little more than week before a scheduled meeting. The Fed statement issued with the decision rationalises the cut as a response to “downside risks to growth”– the phrase is repeated twice in six short paragraphs — and cites recent gloomy data on housing and jobs. Yet the economic news has not grown any worse in the past few days and, given the time needed before monetary policy affects spending, the added urgency seems odd. – The Economist

Bernanke presses panic button: Given the clear connection between Tuesday’s rate cut and global market turmoil, it is hard to avoid at least one conclusion. Bernanke has proven, once and for all, that juicing the stock market is now considered Job No. 1 for the Federal Reserve Bank. The material effects of rate cuts do not show up in economic growth statistics for months or even years after their enactment. By making an emergency “inter-meeting” cut a mere eight days before its regularly scheduled meeting, Bernanke is conducting economic policy in order to appease market psychology. The fragile psyches of Wall Street traders who played such a pivotal role in creating this mess by romping through the derivatives wonderland, are now in control of government strategy. – Andrew Leonard, The Economist

What’s Next After an Intermeeting Move?: Laurence Meyer, a former Fed governor, says today’s Fed action “would be pointless” if it only moved up its action by a week. Instead Fed officials want to “accelerate the pace,” he said in an interview. “Partly with market expectations building in another significant decrease, equity markets chaotic and recession risks rising, the Fed wants to get down to a lower rate.” His firm, Macroeconomic Advisers, expects the central bank to cut an additional half percentage point next week to 3%. – Wall Street Journal

Will the interest rate cut affect me?: … [W]ill average consumers see any immediate benefits from the interest rate cut? Yes. It allows you to buy more stuff, especially if you’ve got excellent credit and need to borrow lots of money for big-ticket items. Consumers aren’t exactly the main focus for emergency rate cuts, which are designed to stimulate the economy and encourage large businesses to spend more. But they do reap the rewards in the long run, and there are some immediate benefits, too. In general, borrowing money—on credit cards or via home and car loans—just got a teeny bit cheaper for many people. You might not notice much of a difference, however, unless you plan to owe—or already owe—a sizable chunk of change. — Michelle Tsai, Slate

Why the European Bank is sitting back: Monetary policy usually takes some time to bite. That is one explanation why the American stock market continued to gyrate on Tuesday after the Federal Reserve’s emergency rate cut. It may also explain why the European Central Bank has given no indication that it will follow suit. — Julia Werdigier, New York Times

The Bernanke put: buttock-clenching monetary policymaking at the Fed: This extraordinary action was excessive and smells of fear. It is the clearest example of monetary policy panic football I have witnessed in more than thirty years as a professional economist. Because the action is so disproportionate, it is likely to further unsettle markets. Even the symptoms of malaise that appear to have triggered the Fed’s irresponsible rate cut, the collapse of stock markets in Asia and Europe and the clear message from the futures markets that the US stock markets would follow (a 500 point decline of the Dow was indicated), are unlikely to be improved by this measure and may well be adversely affected. – Willem Buiter, Financial Times

Why the Fed can’t save us: The problem is that the Fed has only a limited amount of rate-cut ammunition, and expended a lot of it today. It’s expected by the markets to cut rates again next week, and will have used up most of its bullets. I don’t want to get into the what-should-the-Fed do game – I’m a recovering English major, the Fed is full of brilliant people with doctoral degrees and access to information that I don’t have – but I’m growing increasingly uneasy watching short-term rates in the U.S. fall when we’re so dependent on foreign money to cover our trade deficit and the U.S. budget deficit. –Allan Sloan, CNNMoney

Did the Fed panic?: Taken at face value, the [Fed’s] statement actually makes no sense. If you wanted to defend the manner of this dramatic monetary easing, you would have to say that the stockmarket crash had awakened a hitherto sleeping Fed to the true horror of the problems facing the economy. Is that how Bernanke wants his actions to be perceived? Even if it is, since when does the stockmarket convey that kind of actionable information? (And if it does convey that kind of actionable information, why only when it falls, not when it rises?) Not a good day for the Fed, in my view. – Clive Crook, Financial Times

Fed establishes another baleful landmark: But there is a real danger that Mr Bernanke is now held hostage to the panics of jittery financial markets. Traders have already fully priced in another 50 basis point cut in rates next week. If the Fed doesn’t deliver – if yesterday’s move merely brought forward a planned cut – the disaster averted yesterday will presumably merely have been delayed by a week as well. – Gerard Barker, Timesonline

The blogosphere

Australian share market in freefall: Well, I certainly wouldn’t want to be retiring this week. Another $260 billion was wiped off Australian share markets today, on the 11th straight day of losses. This has not occurred since 1982. It can now officially be called a `crash’, according to analysts. The market had already dropped more than 15 per cent in the past two weeks (and that was before today’s results). Yikes! — So Sick of Debt

The Fed Sacrifices the Dollar to Avoid Market Crash:

We shall see how the market eventually settles as the day winds down, but I believe that the emergency 75 point rate cut by the Federal Reserve board is simply a small bandage on a potentially fatal wound. (As I write this the Dow is down 140 points) While this rate cut is going to help a small number of people keep their homes by being able to refinance at a lower interest rate, the dollar is going to take a brutal beating and in the end every citizen (outside of the handful at the top) will be forced to downgrade their standard of living. – Political Lore

Australian Gold Market, Gold Price Continue Dangerous Decline: We shall see how the market eventually settles as the day winds down, but I believe that the emergency 75 point rate cut by the Federal Reserve board is simply a small bandage on a potentially fatal wound. (As I write this the Dow is down 140 points) While this rate cut is going to help a small number of people keep their homes by being able to refinance at a lower interest rate, the dollar is going to take a brutal beating and in the end every citizen (outside of the handful at the top) will be forced to downgrade their standard of living. – The Daily Reckoning

Market Crash: Cop secure Ahmedabad’s largest lake: Investors on Dalal Street have lost a whopping Rs 15.82 trillion in the last seven days of market mayhem that included a fall of more than 4,000 points in the benchmark 30-share sensitive Index or Sensex … Even as Finance Minister P Chidambaram sought to calm investors, saying that enough liquidity would be provided to market players and there was no cause for panic, the Gujarat government was not taking any chances with the trading city of Ahmedabad, which boasts a high concentration of investors in the market, going into a tizzy. On Tuesday evening, a posse of policemen was dispatched to the city’s Lake Kankaria, which has seen many a distraught person commit suicide. The lake is Ahmedabad’s largest and the city police’s decision came after witnessing the gloom on the streets as the markets continued their downward plunge. — Indian Pad