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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (33164)	5/7/2003 1:36:56 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

I dont think there is room for another interest cut, Jay. Had the FED cut rates yesterday, the USD would had plummeted! Greenspan is doing Hellmstrom (former ERIVY CEO) taking charge. Do nothing and expect that a recovery somewhere lft sales and he comes upas a hero. It didn't happen. Fed Keeps Rates Steady, but Door Open Tue May 6, 2003 06:47 PM ET By Glenn Somerville WASHINGTON (Reuters) - Federal Reserve policymakers on Tuesday kept U.S. interest rates steady at 1961 lows but warned of a possible "unwelcome substantial fall in inflation," saying this meant the economy was in danger of weakness ahead. In a brief but complex post-meeting statement, the Fed made clear that it still hoped a lagging recovery would gain steam now Iraqi hostilities have ended but opened the door to future reductions in borrowing cost by saying it was not clear when a robust recovery would come. Analysts said the Fed evidently sees multiple threats to the expansion but has chosen to wait and see, at least for now, whether an acceleration in activity takes hold without new stimulus from lower credit costs. "They decided to go to an easing bias because there are two risks: first, possible deflation is a real concern. And second, the economic data we've seen so far have been much weaker than expected, especially in manufacturing and the labor market," said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis. The statement restored the "balance of risks" assessment dropped at its last meeting on March 18, but modified it to include the reference to potential falling inflation. The FOMC said in March that pending war with Iraq made gauging the economy's prospects impossible. U.S. bombing of Iraq began a day after the March meeting. On Tuesday, policymakers split the risks between those to growth and those to prices -- saying while upside and downside dangers to healthy growth were "roughly equal," the small threat of too-slow inflation meant that "taken together, the balance of risks to achieving (the Fed's) goals is weighted toward weakness over the foreseeable future." BACK TO THE 1960s The FOMC decision kept the trendsetting federal funds rate for overnight loans between banks at 1.25 percent, where it has been since a cut last November. Analysts said the warning about weakness might set the stage for rate cuts in June if economic signals remain weak. The fed funds target influences borrowing costs throughout the economy. A poll of Wall Street primary dealers -- those that deal directly with the Fed -- taken after the rate decision found 11 of 20 expect policymakers to hold rates steady at their next gathering in June, while nine saw a rate cut next month. After the Fed decision, Treasury prices rose on hopes it meant more rate cuts ahead. Stocks ended in positive territory, up 56.79 points at 8,588.36 while the high tech-laden Nasdaq composite index added 19.67 points to end at 1,523.71. But the dollar was hit hard. The euro rose as high as $1.1453 against the dollar, according to Reuters data, setting a new 4-year high for the second consecutive session, in the belief that potentially lower U.S. rates would make dollar-denominated assets less appealing to investors. Fed Chairman Alan Greenspan told Congress last week he expected a healthier pace of expansion ahead, provided business spending gathers steam. "I continue to believe that the economy is positioned to expand at a noticeably better pace than it has during the past year, though the timing and the extent of that remains uncertain," Greenspan said. Those words were echoed in the post-meeting statement. Recent economic signals have been varied, with signs consumers remain willing to spend but with distinct softness on the job-creation front. Last week, the government said the economy shed 48,000 jobs in April, bringing total job losses to more than half a million from February through April. JOB LOSSES MOUNTING Economist Lara Rhame of Brown Brothers Harriman in New York said Fed policymakers were forced to concede the economy was weak, whether or not they are contemplating more rate cuts. "They have got to at some level acknowledge the fact that the economy is quite vulnerable because of job losses," she said. Nearly 2 million U.S. jobs have vanished since President Bush, who faces reelection next year, took office. He has seized on the latest dismal labor market news to press Congress to pass a hefty tax cut, an effort to make the nation's fiscal policy more stimulative. There was some evidence earlier on Tuesday that the cheapest interest rates in decades were encouraging consumers to keep shopping. Big U.S. retail chains posted a moderate 2.5 percent pickup in sales last week from the same week a year earlier, the Bank of Tokyo-Mitsubishi and UBS Warburg said. The Fed still is looking for signs that business profits and spending on new capital equipment -- trends that are intertwined and vital for growth -- will pick

To: TobagoJack who wrote (33164)	5/7/2003 1:43:24 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Jay, we talk a lot about US state of affairs. But I stopped now and thought about: What I would do if I had to make the case for the US? (Remember when the Japanese said they would limit the numbers of credit card for the US citizens because they were spending too much and not saving enough?) 2 million jobs vanished since Bush took over and he'll face an election next year: What would you suggest to someone in charge of financial policy making in the US?