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To: Tom Hua who wrote (14352)	9/30/2001 10:48:09 AM
From: Roger A. Babb	Respond to of 19633

Tom, interesting that I am hearing some expectations of a 75 cut, but we have no votes for that on this thread. I continue my expectation of 0 cut this week. As for market reaction, I predict: rally if no cut, must mean things will soon be better fall sharply on 25 cut, things are still bad but cut was less than market expects little change on 50 cut, it is expected rally on 75 cut, but some worry about what it means

To: Tom Hua who wrote (14352)	9/30/2001 10:52:51 AM
From: Roger A. Babb	Read Replies (1) \| Respond to of 19633

Tom, another reason for my expectation of no cut is that the lower interest rates are actually making it MORE difficult for small business to obtain new loans. As the interest rates fall, the banks have less interest income to cover risk and thus tighten lending standards severely. It is now much harder to get a business loan than it was six months ago and banks are pressuring business to pay down existing loans. Low interest rates are of no benefit if you can't get the loan approved.

To: Tom Hua who wrote (14352)	9/30/2001 11:48:42 AM
From: Glenn Petersen	Respond to of 19633

Tom, please put me down for a .25 bp cut. Sunday September 30 11:15 AM ET Lack of Inflation Pressure Gives Fed Room By Barbara Hagenbaugh WASHINGTON (Reuters) - Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) has had a rough year, macroeconomically speaking, what with a sharp slowdown in business spending followed by devastating attacks on the United States that rocked the foundations of America's economy. But the one thing he'll have on his side when the U.S. central bank meets on Tuesday is a lack of pressure from inflation. Economists widely expect the Fed will cut interest rates on Tuesday for the ninth time this year to prop up an economy already weak before the Sept. 11 attacks in New York and in Washington. A large number of analysts believe the economy slid into a recession following the attacks. Many economists are expecting another half-percentage point reduction, a relatively aggressive move that would reduce the key federal funds rate, which influences borrowing costs across the economy, to its lowest level in more than 39 years. The Fed, along with the world's other major central banks, acted quickly in the wake of the attacks to pump liquidity into the financial system and reduce borrowing costs. The reason it can afford another rate cut this aggressive is that prices are under control, analysts said. ``The fact that inflation is not a concern means the Fed can really focus on the hit to the economy,'' said Tom Gallagher, a political economist for New York-based International Strategy and Investment Group. Gallagher is expecting the Fed to cut interest rates a half-percentage point to help boost consumer confidence. The Fed is expected to announce its decision at 2:15 p.m. Tuesday. NO BITE The closely watched Consumer Price Index (news - web sites) rose a mere 0.1 percent in August following a 0.3 percent drop the previous month. Excluding the more volatile food and energy sectors, the CPI rose 0.2 percent in August and in July. Economists have happily watched the prices of oil, gasoline, heating oil and other energy goods tumble after Sept. 11 as worries about the economy and reduced travel weighed on prices. Not only do energy cost hikes often cause inflation, they can sap household spending as consumers shell out more to power their cars and to heat their homes. Even St. Louis Fed President William Poole, who has been the most vocal member of the Fed this year in expressing inflation worries, seems to be changing his tune. Poole, who voted against a rate cut in June because of his inflation concerns, on Sept. 20 said the Fed could cut rates further, calling inflation ``the dog that didn't bark.'' The Fed has slashed interest rates eight times this year by a total of 3.5 percentage points. Currently, the fed funds rate is 3 percent, its lowest level in more than seven years. The Fed's most recent move came on Monday, Sept. 17, the day financial markets reopened for the first time since the attacks. U.S. central bankers cut rates a half-percentage point following a conference call. In a Reuters poll taken on Friday, 21 of 25 bond trading firms that deal directly with the Fed predicted the central bank would cut rates by a half percentage point. Four firms forecast a quarter-point reduction. ``ENOUGH STEW IN THE POT'' Data released on Friday confirmed that consumer confidence has been wounded since the attacks. The University of Michigan's final consumer sentiment index fell in September to 81.8, its lowest level in nearly eight years, from 91.5 in August. The September reading was cut from a mid-month estimate of 83.6. The drop in sentiment between September and August wasthe largest one-month plunge since August 1990, when the Gulf crisis began, and the survey showed that the second week after the attacks was when American attitudes fell the most sharply. Consumer confidence data will be on Greenspan's radar screen as he assesses the economic fallout of the attacks since it was consumer spending, which drives two-thirds of economic activity, that helped keep the slowdown earlier this year from becoming a full-blown downturn. By cutting a half-point, Fed officials are ``continuing to send a signal that the Federal Reserve in an orderly way will do what it can to support the economy over time,'' said Stuart Hoffman, chief economist for PNC Financial Services Group. But others said a less aggressive reduction of a quarter percentage point was more appropriate since the Fed has already cut interest rates repeatedly this year. Economists believe changes in interest rates take hold in the economy with long lags and some say the Fed's initial cuts in January are just now hitting the broad economy. ``There's enough stew in the pot, we just have to bring it to a boil and see what it tastes like,'' said William Dunkelberg, chief economist for the National Federation of Independent Business. He said the Fed should consider not cutting rates at all. H