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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (16259)	8/21/2001 7:40:23 PM
From: stockman_scott	Respond to of 52237

Chicago Economists on the rate cut... ____________________________________________ From the Crain's Chicago Business Newsroom Local economists question Fed cut by Ellen Almer • August 21, 2001 <<Tuesday's quarter-point interest rate cut by the Federal Reserve didn't come as a surprise to local economists, but some of them are questioning whether the cut is even necessary, as certain leading indicators show the economy may already be rebounding. The cut—the seventh so far this year—is "cosmetic," said Bernie Lashinsky, a Chicago-based economist. "It may make everyone feel good, but it's not going to be ground shaking," he said. In fact, a real economic upswing may have already started, with or without the cut. Mr. Lashinsky, a columnist for ChicagoBusiness.com, noted that certain key indicators—such as unemployment claims and automotive inventories—are leveling off or improving. As for those indicators that are continuing to lag, including inventory levels in other industries, Mr. Lashinsky said, "We are probably at the bottom," and that the negative data many people are referring to "is for June, and this is August." Diane Swonk, chief economist for Bank One Corp. in Chicago, agreed, noting that housing is up 13% over last year, "absolutely defying gravity," and that production has stabilized. "This ain't a recession," she said. She, too, was blase about the rate cut, noting that it likely had to be done to prevent a meltdown of the financial markets, but that such cuts are never an instant boost to the economy, because it takes six to nine months for their effects to be felt. "We're still waiting to see the effect of the Jan. 3 cut," she said. The Fed action brought the federal funds rate, a benchmark for short-term lending rates throughout the economy, to 3.5 percent, its lowest level since spring 1994. The central bank also chopped the discount rate—charged on direct Fed loans to commercial banks—by a quarter point to 3 percent. In fact, some experts are saying today's cut may be detrimental, since the economy might be humming along again by the time its effect is felt in half a year. "But it's a lot easier to bring the punch to the party than to take it away," Ms. Swonk said. "This is a very impatient market, it's unrealistic in terms of its expectations." Ms. Swonk said she believes the October economic data will be more positive.>>