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To: Deeber who wrote (6394)	10/15/1998 4:33:00 PM
From: Frederick Langford	Respond to of 119973

NEW YORK, Oct 15 (Reuters) - Following are comments from U.S. economists after the Federal Reserve cut the federal funds rate 25 basis points to 5.0 percent and the discount rate 25 basis points to 4.75 percent. The Fed cut the funds rate at its regular policy making meeting on September 29 and said it was acting again before the next meeting on November 17 in response to growing lender caution and unsettled financial markets, as well as to sustain U.S. economic growth. PETER KRETZMER, SENIOR ECONOMIST, NATIONSBANC MONTGOMERY SECURITIES LLC: "This cements the idea that the Fed is truly concerned about the illiquidity in these markets and how this could translate into more financial problems and ultimately problems with the real economy. "They've been getting lots of free advice. This is a way to show their concern, but also add liquidity. It's a long way between meeting to November 17. I think Greenspan believes that when all is said and done he doesn't want to be left holding the bag on this thing. JOHN LONSKI, CHIEF ECONOMIST, MOODY' INVESTORS SERVICE: ''Helping to prompt this action by the Federal Reserve was perhaps worry of a possible credit crunch given the very wide spreads over Treasuries for both investment grade corporate bonds and junk bonds.'' RAYMOND WORSECK, CHIEF ECONOMIST, A.G. EDWARDS AND SONS INC: "That's good news. The discount rate cut is a confirmation that this is a policy trend and not just one-time event. Of course, I don't think anybody needed to be convinced of that. "It would also suggest that there is more stuff behind the bushes than meets the naked eye maybe that the Fed is concerned about. ''This had been discussed for week or so as beeing a possibility...The market's initial response is bullish.'' DAN SETO, SENIOR ECONOMIST, NIKKO SECURITIES: "I can only speculate there is enough concern about liquidity. Clearly that's been the focal point of many of the comments recently. There hasn't been other developments that would warrant such a surprising move. "Obviously Wall Street has been suspicious of world financial problems, and therefore, they have been what the Fed would call excessively risk-averse. It is a surprise. Many people were open to the idea of further easing, but we were looking for some signs of trouble, first. Here, I think the Fed took the lead, before any clear signs of problems arose." JOHN WILLIAMS, CHIEF ECONOMIST, BANKERS TRUST NEW YORK: "This was not expected at all. It came as a big surprise. Obviously the Fed is concerned about financial conditions. ''The markets will like - the equity markets and the bond market.'' RICHARD BERNER, EXECUTIVE VICE PRESIDENT AND CHIEF ECONOMIST, MELLON BANK: ''It reflects (the Fed's) concern that liquidity crunch is a serious issue and threatens to throttle economic activity and this is a means to stop it in its tracks.'' KATHRYN KOBE, VICE PRESIDENT AND SENIOR ECONOMIST, JOEL POPKIN AND CO: ''I'm surprised they moved again so soon. However there was room for them to move the Fed funds rate down, given where the market had set other interest rates. While inflation is not an immediate problem, the producer price index that was announced earlier today, showing a total increase of three-tenths of a percent for September, does not indicate general deflation in the United States. So I think they will still have to watch out for inflation.'' GREG JONES, CHIEF ECONOMIST, BRIEFING.COM: "Not too surprising, though the market wasn't totally expecting this (today). Greenspan can go to the board and get a discount rate cut anytime he wants it, and it's clear all the board members were supportive of another easing. "Moving between meetings was totally justified by the current economic conditions. They have wanted to move policy changes away from being tied to a specific economic release. They want people to see policy changes based (instead) on a broad scope of factors. The short end (of the Treasury market) is going wild. We're seeing tremendous curve steepening here, which is the norm. What we're going to have to watch, though, is the dollar has fallen a full yen since the announcement and the long end could be in a little bit of trouble if the dollar/yen slide continues. The short end is safe even if that happens. It's not enough (of a cut) in terms of the long term. They're going to have to come down another 50 to 75 basis points." ROBERT BARR, SENIOR ECONOMIST, FANNIE MAE: "We were thinking a fed funds cut was due in November. Certainly, a number of indicators suggested the Fed Funds rate was too high. "It signals there is perhaps some weakness in the economy the Fed is trying to combat. ''It is possible the markets could take suddeness of the Fed move with a raised eyebrow suggesting there is something down the road the Fed sees that they don't see quite yet.''