Fed Put

The “Fed Put” is the widespread belief that the US Federal Reserve (commonly referenced as “the Fed”) can always rescue the economy by decreasing interest rates.

The term originates from the analogous comparison of selling a put option on the market. When one sells a put option, that provides the obligation to buy a stock at a predetermined price if the buyer of the put option wants to sell it to you. Similarly, when a central bank is easing monetary policy, it may have an idea of how low it is willing to see the financial markets fall before intervening with liquidity measures to help support their valuations—Read more at DayTrading.com. “Fed Put.”