The Fed will hold a two-day meeting that wraps up on Jan. 30. And according to futures listed on the Chicago Board of Trade, investors are pricing in a 100 percent chance of at least a quarter-point cut, to 3.25 percent, and a 66 percent likelihood of a half-point cut, to 3 percent.
"There is a legitimate chance of another cut next week. The Fed wants to stay in front of things and at this stage, they'd rather err on the side of having rates be too easy than too restrictive," said Jack Ablin, chief investment officer with Harris Private Bank....
"There are already rumors that the Fed may cut more next week but at this point, I would think that they are going to stand pat," said Oscar Gonzalez, economist with John Hancock Financial Services in Boston....
Ed Yardeni, president of Yardeni Research, an independent market research firm, agreed. He sees more rate cuts ahead...but not next week."The Fed probably won't do anything next week. They are going to take a break now and see how things unfold," he said.
Norris said that a federal funds rate of 3 percent would be low enough to stimulate growth again without risking too much in the way of inflation. But he is concerned the Fed may cut rates too much.
Some economists have argued that the Fed lowered rates too aggressively during the 2001 recession - the federal funds rate eventually bottomed out at 1 percent - and that those historically low rates helped encourage the type of reckless subprime lending that is the root of the current economic crisis.
Opinions are varied on if and how much of a rate cut. The inflation threat seems to be understated. At this point, I don't think the Fed knows. What and see how the Dow Jones responds tomorrow and the remainder of the week. If it is below 12,000 a 0.50% is likely. Over 13,000 before the next Fed meeting could signal no increase.
No comments:
Post a Comment