Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Mark Konrad who wrote (46638)	2/5/2001 9:07:12 AM
From: Condor	Respond to of 57584

from..The Bull Market Financial Report...Monday 1. FED CUTS INTEREST RATES BY 50 BASIS POINTS The Fed cut interest rates by 50 basis points on Wednesday afternoon and released the following statement. The Federal Open Market Committee at its meeting today decided to lower its target for the federal funds rate by 50 basis points to 5-1/2 percent. In a related action, the Board of Governors approved a 50 basis point reduction in the discount rate to 5%. Consumer and business confidence has eroded further, exacerbated by rising energy costs that continue to drain consumer purchasing power and press on business profit margins. Partly as a consequence, retail sales and business spending on capital equipment have weakened appreciably. In response, manufacturing production has been cut back sharply, with new technologies appearing to have accelerated the response of production and demand to potential excesses in the stock of inventories and capital equipment. Taken together, and with inflation contained, these circumstances have called for a rapid and forceful response of monetary policy. The longer-term advances in technology and accompanying gains in productivity, however, exhibit few signs of abating and these gains, along with the lower interest rates, should support growth of the economy over time. Nonetheless, the Committee continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future. In taking the discount rate action, the Federal Reserve Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Minneapolis, Dallas and San Francisco. COMMENT: The Fed is clearly worried about the economy. They cut interest rates by 100 basis points during the month of January -- a very large move by a Fed that tends to like gradual steps. The Fed directly cited the drop in consumer confidence as a big problem. This is because consumer spending drives around two-thirds of the U.S. economy. Therefore, if the consumer stops spending, then the economy will falter. The Fed also clearly stated that they see the current risk as more economic weakness than anything else. They are basically saying that the economy could get weaker, and they will continue to cut interest rates in the future to support the economy, if needed. =====================================