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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (2039)	8/2/2002 1:59:53 PM
From: Proud_Infidel	Read Replies (1) \| Respond to of 25522

Goldman Sees Fed Rate Cut to 1 Percent NEW YORK (Reuters) - Investment bank Goldman Sachs (NYSE:GS - News) on Friday aggressively revised its outlook for Federal Reserve policy and is now predicting a 75-basis-point cut in official interest rates by year-end. The Fed funds rate currently stands at a four-decade low of 1.75 percent. Previously Goldman had predicted no move in rates this year and no tightening until the third quarter of next year. "Fed officials are likely to ease by 75 basis points in 2002 Q4, reducing the target federal funds rate to 1.0 percent by year-end," Goldman Sachs analysts said in an electronic mail note. The analysts said they did not believe the United States would fall into a double-dip recession, but that Fed officials have probably been surprised by the recent weakness in economic data. "Accordingly, although Fed officials undoubtedly share our view that double dip is not the central case, we believe they will want to take out more insurance against that possibility," the analysts said in the note. A string of reports this week on economic growth, employment, factory orders and consumer confidence have all been weaker than expected, prompting some analysts to start revising down their economic forecasts. The influential bank's call contributed to a strong rally in Treasuries where two-year note yields dived to record lows under 2.00 percent, down 49 basis points in just three sessions. Eurodollar futures also surged ahead as the market moved to tighten the odds on the Fed cutting rates before year-end. TRIMMING GDP FORECASTS Most other primary dealers that deal directly with the Federal Reserve believe interest rates will be held at their current low levels until some time next year, barring a financial shock or a sustained run of weak economic news. Official figures on Friday showed the U.S. economy generated a meager 6,000 new jobs in July, around one-tenth of what economists had expected, raising comparisons with the last "jobless recovery" from the 1990-91 recession. Many believe the Fed could stand pat into the second quarter of 2003, echoing the long period following the early 90s recession when rates were left low for about 17 months. Goldman Sachs noted a recent study by Fed researchers of Japan's battle with deflation suggests that in a slow growth, low inflation environment, policymakers should err heavily on the side of easy monetary policy. Although Goldman trimmed its economic estimates, it is not forecasting a return to negative growth. The e-mail note on Friday said gross domestic product (GDP) was forecast to grow at an annual rate of 2.5 percent in the third quarter and 2.0 percent in both the fourth quarter of this year and in the first quarter of 2003.