California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

Despite a report illustrating stronger than expected GDP growth of 3.9 percent for
the third quarter, the Federal Reserve’s Open Market Committee cut interest rates
yesterday, the second time in six weeks.

The Fed cut both the Federal Funds Rate and the Discount Rate.  The case for making
the cuts was far from clear.  Investors and analysts have been betting on a cut largely
because of the downturn in the housing market.  However, it would appear that the recent
slowdown in housing hasn’t impeded the broader economy.

In a statement accompanying the vote, the Fed identified that it believes that the upside
risks of inflation roughly balance the downside risks to growth.

The rational behind the rate cut is that the pure economic expansion will likely slow in the
near term partly reflecting the intensification of the housing correction.

I am Tim Johnson and this has been the California Business Minute.