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Strategies & Market Trends : Market Gems-Trading Strong Earnings Growth and Momentum -- Ignore unavailable to you. Want to Upgrade?

To: Lane Hall-Witt who wrote (3509)	1/31/2001 1:49:37 PM
From: 2MAR$	Respond to of 6445

Talk Of Fed Rate Easing Beyond Consensus Haunts Dlr By John Hardy Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Talk of a 75- or even 100-basis-point easing in U.S. interest rates Wednesday haunted the dollar Wednesday ahead of the Federal Open Market Committee's decision, due around 2:15 p.m. EST. " It's highly unlikely," said Ben Strauss, a vice president at Bank Julius Baer in New York. "It would be viewed as panicky and would be very negative for the dollar." Strauss joins the vast majority of U.S.-based analysts in expecting a 50-basis-point move and thinks," Whatever effect it would have, is already priced into the market. " If it comes it'll be a sigh of relief and we'll all go on our merry way." Weak U.S. consumer confidence data on Tuesday played a role in expanding rate-reduction predictions an additional 25 basis points. The consumer confidence index slipped to a four-year low in January and suffered its biggest one-month drop since the Gulf War in 1990. However, such a cut would be substantially more than the broad consensus for a 50-basis-point downward adjustment in the Federal Reserve's target rate. Equally, the market would be surprised by a reduction of only 25 basis points and would probably react negatively. At around 1.45 p.m. EST (1845 GMT), the dollar was buying Y116.35, little changed from Y116.37 early in London but up from Y115.90 late Tuesday in New York. The euro was trading at $0.9303, up slightly compared with $0.9295 early in London but above $0.9268 seen late Tuesday in New York. Historically, the Fed has typically moved in modest incremental steps of 25 basis points and larger moves are exceptional. While the last two adjustments-on January 3, 2001 and May 16, 2000--were 50- point moves, there were no adjustments of that size in the preceding five years. You must go back to February 1995 for the last time FOMC called for a 50-point move. Adding to the factors that make a 75-point move is unlikely, is the sharp tonal change which the Fed is already dealing with. It was as recent as May 16 of last year that the central bank upped rates in an anti-inflationary move. Even by November, the Fed's economic assessment was still primarily concerned with the problems of strong economic growth. Since then the tone has changed with a vengeance and now the overwhelming concern is with the threat of impending recessionary pressures. Also, it seems unlikely that Fed Chairman Alan Greenspan would be comfortable moving so rapidly from concerns about inflation to aggressively fighting a recession, analysts said. John Hardy, 201-938-2122; john.hardy@dowjones.com. (END) DOW JONES NEWS 01-31-01 01:46 PM * end of story *