Word: feds
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...with six weeks before the next Fed meeting, there may be more to come. Because every move comes with words, and listen to these: "Business and consumer confidence are eroding further... requires a rapid and forceful response... inflation contained." Translation: There's a good chance of another between-the-meetings rate cut sometime before March, but until then Greenspan and the boys would like to read a few more tea leaves - and not risk sending the 75-basis-point message that the end of the world is nigh...
...Fed action due out Wednesday, it means that Greenspan and his colleagues have to cut short-term interest rates that much further to stay ahead of the curve. In a week, the markets have gone from "quarter-point, maybe a half-point" expectations to "definitely a half-point," and behaved accordingly. A quarter-point cut would now be an absolute disaster on the Street, a half-point will make little more than a ripple...
...heard it here: 75 basis points (three quarters of a point) is what the Fed needs to put a smile on the face of the bond markets and the real economic bears, and it increasingly looks as if Greenspan is one of them. The Fed chairman went out of his way to declare during his Senate testimony last week that economic growth was "close to zero," and the board's consensus may well be that we're in a recession right...
...Only a buck? That's partly because trading was extra cautious Monday ahead of the Fed meeting Wednesday, partly because this was the kind of news that traders generally love to hear - the slenderizing cuts are designed to return the division to profitability - and partly because it wasn't much of a surprise...
...even possible that the Chrysler news is the straw that bumps the Fed up from the expected quarter-point rate cut Wednesday to a half-point. Which would make Wall Street very happy indeed...