Did the Fed Panic?

The Federal Reserve's decision to lower the Federal Funds rate on Tuesday, January 22, was a surprise on two fronts: (1) the size of the cut was the largest since at least 1990, (2) the move was made in advance of the Fed's regularly scheduled policy meeting next week. While some people are doubtless happy about the cut, others are concerned that the Fed maybe has lost control of the situation. Has the Fed panicked? That may be a little harsh, but it is clear that the Fed now realizes that the economy is in worse shape than it realized and that may be one reason why the stock market was still down on Tuesday and is down again in early trading on Wednesday.
The "r" word is getting tossed around a lot lately, but it is interesting that we do not even know yet if GDP growth has turned negative (the preliminary figures for GDP for the fourth quarter of 2007 will not be released until next Wednesday, January 30). One Federal Reserve Bank President, William Poole of the St. Louis Fed, voted against the emergency rate cut saying that he did not think conditions warranted it. I have to agree with him-to me, the Fed's move seems like it has lost control and is responding to events rather than anticipating them. And is the Fed just setting us up for the next bubble by again deciding to flood the markets with liquidity?