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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: Softechie who wrote (43679)	12/17/2000 10:16:37 PM
From: Condor	Respond to of 57584

Softee...you're not AG in drag are you? <gg>

To: Softechie who wrote (43679)	12/18/2000 8:44:15 AM
From: American Spirit	Respond to of 57584

Rate Cuts Likely now Says Wall St. Journal. This week? WASHINGTON -- The U.S. economy has slowed so rapidly that Federal Reserve officials are contemplating a more aggressive response Tuesday than financial markets anticipate. They could issue an explicit statement that the risks of recession now exceed those of inflation, or they even may cut interest rates. Public comments by Federal Reserve Chairman Alan Greenspan and others have led most to expect the Fed's policy committee to abandon the Nov. 15 stance that the "risks continue to be weighted mainly toward conditions that may generate heightened inflation" and start cutting rates early next year. But Fed insiders say there is discussion of doing more, though there is no firm consensus yet. Both private and Fed-staff forecasts have been marked down during the past several months, and there is some concern inside the Fed that the economy's momentum is slowing more rapidly than desired. Incoming data are mixed, but many companies have reported a surprisingly abrupt drop in sales and orders, and consumer confidence has fallen sharply. Fed officials welcome a slowdown but differ on how much of a slackening -- and how much of an increase in unemployment -- is desirable to avoid a resurgence of inflation. Those with a more optimistic view of the economy's long-run potential fear things are slowing too much, too fast; those with a more conservative view are less concerned. Members of the Federal Reserve Board in Washington are scheduled to meet with staff economists Monday for an important review of the outlook. Presidents of the regional Federal Reserve Banks join board members Tuesday to decide whether to change rates and to adopt a new public statement reflecting current Fed thinking. The most important voice will be Mr. Greenspan's. At the very least, the Fed will move into neutral with a statement that says it believes the risks of inflation no longer exceed the risks of recession. But Mr. Greenspan probably would have little difficulty achieving consensus for a statement that comes closer to reality and confirms that the Fed expects to cut its key short-term interest rate in the months ahead. The federal-funds rate, the Fed's primary tool at the moment, is at 6.5%. The Fed chief often uses the wording of announcements to achieve harmony inside the Federal Open Market Committee. Such a public tilt toward easing could satisfy all factions inside the committee, both those who are prepared to cut rates now and those who would rather wait to avoid reinflating financial markets. With expectations of a rate cut next year so prevalent, both inside and outside the Fed, Mr. Greenspan probably could persuade the committee to cut rates now -- as "insurance," as he often puts it, against a greater-than-desired slowdown in the economy -- if he decides such a move is wise. Although Fed officials play down the degree to which the political cycle affects their decision making, an aggressive move now, whether in word or deed, could help insulate the central bank against blame if the economy is, in fact, moving into recession. Eager to pin blame for a downturn, if one materializes, on the Clinton administration and to build a strong case for cutting taxes, the arriving Bush administration is loudly calling attention to the weakening economy. "We've got an economy that's slowing down, where we could conceivably get into a recession somewhere down the road, where tax cuts would be important," Vice President-elect Dick Cheney said on CBS's "Face the Nation." Mr. Greenspan and President-elect George W. Bush are to meet in Washington Monday. In his last public comments on the economic outlook, made in a Dec. 5 speech, Mr. Greenspan said, "In an economy that already has lost some momentum, one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household and business spending." The statement was widely read as a significant shift in Fed thinking, and helped push mortgage and other market interest rates down. That, in turn, is stimulating the housing industry and other interest-sensitive sectors. "Thanks to the Fed chairman's heightened credibility globally and his familiarity to the Everyman, Greenspan now has the expanded power of verbally managing policy," Merrill Lynch & Co. economists observed last week. They don't expect the Fed to cut rates until its Jan. 30-31 meeting at the earliest, and argued that the move may be delayed until March. "Reining in the consumer-spending spree without risking a new one involves a careful balancing act by the Fed," Merrill economist Martin J. Mauro wrote, describing the Fed's current dilemma. "Easing too soon risks restimulation of the financial market." But, he added, "Just as important, spending excesses after a wealth retrenchment need to be managed so that consumers do not panic."