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Strategies & Market Trends : John Pitera's Market Laboratory
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To: John Pitera who wrote (3505)3/20/2001 2:54:11 PM
From: John Pitera  Read Replies (2) of 33421
 
The Fed's statement that it would "need to monitor developments closely" mirrors this statement at the December meeting: "The Committee will continue to monitor closely the evolving economic situation." That December statement was followed by an intermeeting cut 15 days later. Also notable that no such "monitor closely" comment was made after the January meeting, and not coincidentally the Fed made no intermeeting move. Once again, today's statement strongly hints at another cut coming soon.

UBS Paine Webber is now saying that the Fed Funds will be at 3.5% by August.

--------Here's the meat of the text of the FOMC announcement:
Persistent pressures on profit margins are restraining investment spending and, through declines in equity wealth, consumption. The associated backup in inventories has induced a rapid response in manufacturing output and, with spending having firmed a bit since last year, inventory adjustment appears to be well underway.
Although current developments do not appear to have materially diminished the prospects for long-term growth in productivity, excess productive capacity has emerged recently. The possibility that this excess could continue for some time and the potential for weakness in global economic conditions suggest substantial risks that demand and production could remain soft. In these circumstances, when the economic situation could be evolving rapidly, the Federal Reserve will need to monitor developments closely. --------
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