US - Federal Reserve keeps powder dry by holding off on rate cuts

There were some surprises about the lack of a cut from the Fed on 16 September; however, as our chief investment strategist Liz Ann Sonders points out, the door is still open. "The case for a cut was based on a weak economy, Lehman's collapse and AIG's woes, lower inflation readings, plunging commodity prices, a stronger dollar and a desired lower cost of capital for banks," she says. "The case for not cutting rates was the Fed wanting to keep some powder dry for future turmoil, at the same time reflecting that the financial crisis is more about solvency than liquidity." The accompany...