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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Stephen O who wrote (2908)	1/6/2001 5:38:13 PM
From: Robert Douglas	Read Replies (1) of 3536

The US Prime rate has been cut to 9% from 9.5%. This is still a very high rate with inflation running at 3.5% say. There is lots of room for more rate cuts. Why shouldn't the prime rate be at 6.5%? Yes, it is a high rate for 3.5% inflation. And what's even worse is that core inflation is closer to 2.5% and on the way lower. I'll say it again, a 6% Fed funds rate is absurd with a core rate of 2.5%. During slowdowns the T-Bill rate should be about the rate of inflation. We are still far above that today. I am still looking for a FF rate of below 4% by summer. Unless the economy unexpectedly strengthens, I think we will get there.

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