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.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (66231)	3/20/2001 8:22:39 AM
From: Rarebird	Read Replies (3) \| Respond to of 116927

Yesterday's action was more of a relief rally and I expect the broad indexes to sell off on the announcement of a 50 BP rate cut today. In the unlikely event of a 75 BP cut I would expect significant strength. I am only expecting a 50 BP ease at today's FOMC meeting and this may come as a bit of a disappointment for the markets. I do, however, expect the Fed to issue an extremely vigilant statement going forward about the dangers of recession and the commitment the Fed has to lowering rates. Why do I feel a 75 basis point cut is unlikely? A 75 BP cut is a little steep for the Fed based on a historical analysis of rate cuts. I also feel that the Fed is concerned about being seen as bailing out the equity markets(HAHAHA!). Such a signal would create a dangerous precedent that when the equity markets are weak that the Fed will step in and wave their magic interest rate wand(Isn't that what they usually do?) Such a signal creates the perception of a moral hazard which policy makers always strive to avoid. Finally, I feel the Big Bad Bear Bush administration probably does not want a 75 basis point rate cut as some weakness in the equity markets will provide the political pressure necessary for a tax cut. To be sure, the best argument for a 75 BP rate cut is that if the equity market declines much further, we will have a serious and deep recession. I think the Fed will act boldly to send a strong signal that it is ready to do whatever is necessary to get the faltering U.S. economy back on track. The more interesting question is if its too little too late. PS FED Funds below 4% is Bullish for Gold.