INSTANT VIEW: Fed cuts fed funds rate 25 points to 4.5 percent

NEW YORK (Reuters) - The Federal Reserve cut the benchmark federal funds rate by a quarter-percentage point to 4.5 percent on Wednesday to buffer the economy against a housing downturn and tighter credit conditions.

The decision by the central bank's Federal Open Market Committee was widely expected by financial markets.

COMMENTS:

BOB WALTERS, CHIEF ECONOMIST, QUICKEN LOANS, LIVORNIA,

MICHIGAN:

"The markets were not spooked by this Halloween announcement. The cut was not a surprise, as evidenced by the fact that long-term interest rates are not much changed from where they were before the announcement.

"The statement focused on the housing correction. That and inflation are two risks they are trying to address. They note some improvement on the core inflation numbers, but said they were watching rising commodity prices. They didn't cut a half point because they don't want to spur price increases, but they also want to make sure that credit markets continue to function well. The Fed is walking a tightrope and will take a wait and see attitude on future rate moves."

JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE

RIVER, NEW JERSEY:

"The big surprise today is still the GDP report, because 3.9 percent growth was way beyond expectations, and two-thirds of that number comes from after the credit problems surfaced in August. It seems the economy won't be performing as poorly as people expected, and euro-dollar will probably remain in the 1.44-1.4550 range. The Fed's move was expected, and speculation now turns to what the Fed will do next. I think they're probably done. Also, I think the ECB may have to start cutting, and that could cause a dollar bounce."

ERIC WITTENAUER, ENERGY ANALYST AT A.G. EDWARDS IN ST.

LOUIS:

"It comes in as expected for the oil market. Obviously we ran up prices into the decision in a continuation of the rally earlier today. I think that had you seen no cut that would have likely been bearish for oil prices, while a larger-than-expected cut would have been supportive.

"In their decision they suggested that growth and inflation are in balance. I think there is one of the things you will continue to see is the Fed's willingness to cut rates in this environment, which could be inflationary. It would support real assets, not only oil but metals.

"The dollar has declined some after the decision and that is supportive of commodities as well."

DIANE DERCHER, CHIEF ECONOMIST, WADDELL & REED, OVERLAND

PARK, KANSAS:

"The statement is being read as being more hawkish than expected. I think the bond market is thinking that the Fed is being tougher on inflation, saying that energy and commodity prices are putting upward pressure on inflation."

"On the growth side, they are saying the third quarter (GDP) number is very solid, but there is still the risk from housing. The Fed is cutting rates now to offset the negative effect from housing. They now have adopted a neutral bias...which leaves them to what they want at the next meeting."

"The general tone is that they are leaving the market with the notion that they will be on hold for now. They are telling the market: 'Don't expect us to do more. Let us sit and wait and look at the data.'"

SCOTT WREN, SENIOR EQUITY STRATEGIST AT A.G. EDWARDS & SONS

INC IN ST. LOUIS:

"The initial market reaction, especially with a dissent in there, is 'Hey don't count on a series of cuts.' That's why we had a pull-back in stocks. It makes sense what they did."

"They're still trying to figure out what is going on. They've been uncertain as to what the future is going to hold. They had the room to throw market a 25-basis point bone while they're still trying to figure out how bad this housing pull-back will be and what it's impact is on the jobs and the overall back. Outside of housing the economy doesn't look to bad."

MICHAEL METZ, CHIEF INVESTMENT STRATEGIST, OPPENHEIMER & CO,

NEW YORK:

"To me, the Fed is really committed to doing what has to be done to prevent the problems in the construction industry flowing into the rest of the economy, and that is reassuring."

"They also are aware of financial stresses, but believe they've moderated to a considerable extent. So on balance I think it's no surprise, and as they say, you sell on the news."

"Really nothing startling at all, and no surprises. To me it validates the view that we've embarked on an easing policy that will extend as far as the eye can see."

DOUG ROBERTS, CHIEF INVESTMENT STRATEGIST, CHANNEL CAPITAL

RESEARCH, SHREWSBURY, NEW JERSEY:

"They were locked into the employment issue. Right now, with the housing situation the way it is, the Fed cannot take a chance of getting behind the curve with employment because in a levered situation that could worsen the housing situation. The dollar at this point probably continues going down. Right now you have to discount what you are seeing in currency markets because traders may be closing out positions."

LINKS: - Federal Reserve website: here