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Sisyphus. The Fed's efforts are reminiscent of Greek mythology: Every time it took the initiative in recent months, the central bank could impress market participants – if at all – only temporarily with its measures. This was not different on Tuesday – at least initially – since the 75 basis point cut failed to live up to expectations.

Rate cuts. A process of rethinking, however, appears to be setting in not only with the Fed. Even though one or two further rate cuts seem warranted to halt the economic slowdown, the Fed must be careful not to overstep: First, inflation expectations are rising and, second, the central bank could run out of ammunition (pages 4-8).

Shift of emphasis. The FOMC already indicated that it intends to slow the pace of rate cuts – also because interest rate policy is only suitable to solve macroeconomic problems but not capable of averting systemic financial crises. This requires efforts on other fronts, which the Fed and the US Administration now wish to press ahead with.

Possible solutions. We already got a taste of what's to come: First, the Fed will provide sufficient liquidity. Second, further bank consolidation à la Bear Stearns is unavoidable. Third, reliable numbers – however brutal – must be "put on the table". And finally, fiscal support may also be desirable, e.g. a Resolution Trust-style bailout and more financial aid for US consumers (Weekly Comment, page 2-3).

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