thecuriousinvestor is absolutely correct. It takes time for the interest rates to have an affect in the market. The problem is that the market is expecting these rates and every reduction is only working to give a short stimulus. We can't keep dropping rates.

Perception often becomes reality, as I mention in the linked article. From what I can make at this stage, the credit crisis is effectively over, and nothing, not even an increase in interest rates, is going to create a problem. An increase of 25 basis points would make that explicitly clear, besides helping control inflation.

Interest rates take time to filter through the system. Their use in the near term is simply to juice markets through perception more than reality. With the influx of cash through other means - TAF and TSLF, I don't think jiggling them around every month is really a prudent course of action. I think in the case of interest rates, we might do well to sit at this level for a bit and assess the situation. We're barely seem to be turning around the recent disjunction in the markets, there's no need to ring other alarm bells just yet.