McClatchy: Fed likely to cut rates a quarter-point on Wednesday

[babylonsister]

Fed likely to cut rates a quarter-point on Wednesday
By Kevin G. Hall | McClatchy Newspapers

* Posted on Monday, October 29, 2007


WASHINGTON — Wall Street expects the Federal Reserve to cut its benchmark interest rate by another quarter-point on Wednesday, but some analysts question whether that's enough.

The Fed surprised financial markets on Sept. 18 by making a larger-than-expected half-point cut to its benchmark federal funds rate, the rate banks charge each other for overnight loans. It serves as a beacon for a wide array of lending rates in the broader economy.

In September, the Fed set aside its worry about emerging inflation, deciding that problems in credit markets and a deepening housing slump warranted a big chop in lending rates to spark economic activity.

Since then, credit problems have eased, particularly for the short-term debt issued by profitable, sound corporations. Earnings reports by many companies have exceeded analyst expectations, and fears of a job slump appear overblown.

Normally, that would point to the Fed's policy-making body — the Federal Open Market Committee, or FOMC — doing nothing about interest rates at the end of its two-day meeting on Wednesday. After all, a rate cut amid strong economic activity could reignite inflation. Oil prices are already more than $90 a barrel — itself inflationary.

So why do markets expect a rate cut?

more...

http://www.mcclatchydc.com/homepage/story/20909.html

[Rex]

1. People are back into debt with credit cards.

Everyone who got out of debt during Clinton, right back there again under DickBush.

[DesertFlower]

3. it's going to get worse.

have you seen the jump in prices in the grocery store? things have not gone up 5 or 10 cents. it's more like 30 cents. and there going to go up more with oil at it's all time high.

the average person will have to use more credit cards.

the new COLA for social security for 2008 is 2.3%. that is no where near enough to help out with these rising prices.

[Rex]

7. Yes, gallon of milk $4.30

5/$10 dollars when was 4/$6. Gas at $3 a gallon. Cereal and soda indicator.

[DesertFlower]

8. i buy a lot of health foods, for myself,

but i have to do my elderly mom's shopping. that's where i'm really seeing it. just the other day it was $72.00 for her groceries and she's not a big eater.

[DesertFlower]

2. i think it sucks.

those of us who have managed to put a few bucks aside will be going back to 2% interest on our money. last year we were able to get a CD at 5.45%. now there down to 4.50%.

[Deja Q]

4. The stock market boffins sell when the dollar drops...

They seem to buy in anticipation of a rate cut.

When the rate is cut, the dollar drops.

At what point do businesses have to pony up what their customers have to? Surely businesses have to live by the rules just as much?

[ThomWV]

5. Bet'cha they go a full half. What the hell, once you're on a binge

Let the money flow, let it flow like wine ....

[Lone_Star_Dem]

6. Consumer inflation is going to be killer

Literally.

From the article:

In weighing a half-point cut, the Fed must also consider what that might do to oil prices. Oil is mostly traded globally in dollar-denominated contracts. As the dollar declines, oil-producing nations charge higher prices to offset its loss of value. That means a half-point rate cut could push oil prices over $100 a barrel to an inflation-adjusted all-time high.

[taught_me_patience]

9. Can you refinance a student loan

before the semester is over? I've got 30k and it's dropped .5% and will drop again...

taught.

[ThomWV]

10. Don't worry, you'll be paying it off with worthless dollars anyway