Fed rate cut

Ted Scott, manager of F&C's UK Growth & Income Fund, comments: "The rate cut is a response to the rapidly deteriorating economic conditions that the market is increasingly factoring in. Indeed, the market has spoken to the Fed and the Fed has listened. In the short term that may provide a fillip to equities and a relief to borrowers.

However, the move also smacks of panic. It is an emergency cut as the meeting was not scheduled until the end of the month. Furthermore, the cut suggests that the economy is already in dire straits and paradoxically confirms the markets worst fears.

The Fed has been reactive rather than proactive and the danger is that it is too little, too late. For the longer term such a loose monetary policy runs the risk of stocking up inflation which may be why the Fed has been slow to react. The worst scenario would be stagflation.

In the UK the MPC has been even more tardy and there will be increased pressure on the committee to cut by more than 25bps at the next meeting. The reputation of both Central Banks has been tarnished in recent months in my view.

The market is oversold and due a bounce with value emerging in certain selected areas but on balance the way the Fed has managed its monetary policy cannot be construed as good news."