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Strategies & Market Trends : Pump's daily trading recs, emphasis on short selling -- Ignore unavailable to you. Want to Upgrade?

To: TVEYE who wrote (2978)	6/27/2001 2:49:51 PM
From: Art Baeckel	Respond to of 6873

News: Economy Fed cuts rates a quarter Trying to ward off recession, U.S. central bank makes 6th cut in 2001 June 27, 2001: 2:28 p.m. ET NEW YORK (CNNfn) - The Federal Reserve cut short-term interest rates by a quarter of a percentage point Wednesday, its sixth cut this year as part of a continuing effort to keep the U.S. economy from slipping into a recession. The federal funds rate, the central bank's target for an overnight bank lending rate, now stands at 3.75 percent, its lowest level since April 1994, when the United States was recovering from a recession. The Fed also cut the rarely used discount rate to 3.25 percent from 3.50 percent. The Fed, in a statement accompanying its decision, also indicated it may not be done cutting rates for the year, saying it still is concerned about the sluggishness of the economy. Economists had expected a rate cut, but were divided about how big it would be. A slim majority expected a quarter-point cut, though many began to anticipate a more aggressive, half-point cut in the days leading up to the Fed's announcement. Many analysts were especially curious about what the Fed would say about its possible future actions. The Fed's stance changed little from when it cut rates on May 15 and said the risks for the economy were "weighted mainly toward ... economic weakness." The Fed did not, however, hint at any inter-meeting cuts, meaning any future cut would likely wait until its August 21 meeting, eight weeks away. U.S. stock markets fell immediately after the announcement, but then stabilized moments later. Meanwhile, short-term U.S. Treasury bond prices were unchanged, while long-term bond prices rose. Most analysts expected little stock market reaction to the cut; they have shown little interest in Fed rate cuts all year. Immediately after the last cut on May 15, the Dow Jones industrial average jumped to 12-month highs, but has fallen nearly 1,000 points since. Meanwhile, the Nasdaq has stayed about the same. Despite relatively good news Tuesday about U.S. consumer confidence, new home sales and orders for high-priced durable goods like cars and computers, the Fed believed, as did many economists, that the economy was still in the grips of the slowdown it's been suffering since the beginning of the year. Click here for CNNfn's economic calendar Analysts believe the Fed was more concerned about the future impact of hundreds of thousands of jobs that have been cut as the manufacturing sector has fallen into recession and corporate technology spending has slowed to a trickle. When people fear for their jobs they usually spend less, and the Fed keeps a close eye on consumer spending, which fuels two-thirds of the U.S. economy. Since the beginning of 2001, the Fed has cut the federal funds rate six times, lowering it from 6.5 percent to 3.75 percent, its biggest series of cuts since it carved 5 percentage points from the rate between July 1990 and September 1992 at the end of the last recession. The Fed cuts rates to encourage the nation's biggest banks to cut their own interest rates, making money more readily available to consumers and businesses in the hope that they'll spend more and boost the economy. Click here for more on the Fed and rates Shortly after the Fed's announcement Tuesday, in fact, Bank of America Corp. (BAC: Research, Estimates) cut its prime lending rate to 6.75 percent from 7.0 percent. Many think the Fed's work is almost done, especially since the U.S. government will begin mailing tax-rebate checks to millions of taxpayers soon, and some analysts fear that more interest-rate cuts could make money too easily available and fuel inflation. Still, the Fed was not overly concerned about inflation at its meeting Wednesday. Fed Chairman Alan Greenspan, speaking before a Senate Banking Committee hearing last week, said he saw little inflation pressure on the economy.