To: MulhollandDrive who wrote (3764 ) 4/18/2001 12:06:53 PM From: John Pitera Read Replies (2) | Respond to Fed Cut Analysis: Here's the key sections of the Fed's policy announcement. The bolding is our addition. capital investment has continued to soften and the persistent erosion in current and expected profitability, in combination with rising uncertainty about the business outlook, seems poised to dampen capital spending going forward. This potential restraint, together with the possible effects of earlier reductions in equity wealth on consumption and the risk of slower growth abroad, threatens to keep the pace of economic activity unacceptably weak. As a consequence, the Committee agreed that an adjustment in the stance of policy is warranted during this extended intermeeting period. risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future. It's the economy, stupid. While the inventory correction is working its way through the popped equity and business investment bubbles leave a profit recession which has slowed investment and the manufacturing sector it drives. The popped equity bubble hits consumer spending like the investment bubble that has soured the outlook for business investment. Yesterday's Fed Brief outlined our belief that the combined forces have finally pulled the consumer in to the downturn which spells recession unless the Fed gets far more aggressive. However, this may not be enough to extend the record length expansion. We expect another 50 bp at the May FOMC meeting as the Fed's effort continues.
