The Fed's art project

The Federal Reserve isn’t about to give away the bank, says John M. Berry in Bloomberg. If it cuts interest rates at all, look for “only a quarter-percentage point with no promise of more to come.” Whatever the Fed does at its Sept. 18 meeting will be largely “a matter of risk management.” Outside of the housing sector, Fed officials aren’t worried “the economy is about to fall out of bed.” But the Fed can’t know how the “generally healthy” economy will be affected by the deflating housing bubble. That leaves monetary policy more art than science. “Look for plenty of art from the Fed before this year is out.”

What the Fed does may not matter all that much to some people, says Randall Forsyth in At least not compared to the actions of “bankers in London.” The three-month Libor, or London interbank lending rate, is at 5.72%, its highest level since January 2001. This could all be “academic except that Libor will determine the rate on billions of dollars’ worth of American adjustable-rate mortgages.” So a 25-basis-point cut by the Fed won’t do anything for “borrowers facing resets on their Libor-based ARMs.”