A Half Point Interest Rate Cut By The Fed?

January 6, 2008 by Douglas A. McIntyre

Some Wall St. analysts believe that the Fed will cut rates a half a point this month. That may raise the expectations high enough so the a smaller cut could send marketing into a tail spin.

According to Reuters “both Goldman Sachs (GS) and JP Morgan (JPM) said on Friday they now see the Fed slashing the benchmark federal funds rate down to 3.75 percent from the current 4.25 percent, with Goldman also considering the possibility of an intermeeting move.”

There are plenty of signs that the economy may be in recession in the current quarter. The Fed’s fire fighters may show up too late. Housing, financial services, and the automotive industries are already in recession. The same may hold true for retail and consumer durables.

If the Fed is tardy, a recession could last through the end of 2008.

Douglas A. McIntyre