Archive for Tuesday, August 21, 2001

Analysts expecting rate cut

Manufacturers hope Fed makes aggressive move

August 21, 2001


— The Federal Reserve is expected to cut interest rates for a seventh time this year when policy-makers meet today, extending the Fed's most aggressive credit-easing campaign in nearly two decades.

Private economists see a move today as a certainty, given the remarks made by Federal Reserve Chairman Alan Greenspan and other Fed officials in recent weeks that the country's yearlong struggles with a weakening economy are not yet over.

"They have pretty much locked in another quarter-point rate cut," said David Wyss, chief economist at Standard & Poor's Co. in New York. "Alan Greenspan does not want another recession on his watch."

In an effort to keep the economy out of recession, the Fed has cut interest rates six times beginning Jan. 3.

The first five reductions were half-point moves, marking the most aggressive Fed easing since early 1982, when the Fed was slashing rates to fight the country's worst recession since the Great Depression.

At the Fed's last meeting, June 27, the Fed added a quarter-point reduction that brought the federal funds rate the interest that banks charge on overnight loans down to 3.75 percent.

While most analysts are looking for another quarter-point cut, some would not rule out a return to a bigger half-point move, arguing that Greenspan and his colleagues may want to deliver a pleasant surprise to Wall Street investors, who already have factored in a quarter-point move.

U.S. manufacturers issued a plea Monday for a bigger half-point rate cut, saying such a move was needed to help alleviate a slowdown in sales. Such businesses have cut 708,000 jobs so far this year, the National Association of Manufacturers said.

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