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Fed officials considering further rate cuts: report
Reuters ^ | 10/02/08

Posted on 10/02/2008 8:55:27 AM PDT by TigerLikesRooster

Fed officials considering further rate cuts: report

October 2, 2008 9:11 AM ET

Reuters

TOKYO (Reuters) - Federal Reserve officials are weighing further interest rate cuts, even if Congress approves a $700 billion financial industry bailout, because of a worsening economic outlook, the Wall Street Journal said on Thursday. A rate cut is still far from certain, partly because of inflation worries, the WSJ said in an unsourced report on its website.

"The Fed's willingness to consider additional rate cuts marks a turnaround from the past few months, when soaring food and energy prices turned its attention to inflation risks," the Wall Street Journal said.

Currency traders in Tokyo said that while there was some chatter about the article among market players, the impact on the dollar seemed to be limited.

The dollar index, which measures the dollar's value against a basket of six major currencies, rose 0.6 percent on the day to 80.162.

Even before the article, investors were bracing for the Fed to lower interest rates as early as this month.

(Excerpt) Read more at news.moneycentral.msn.com ...


TOPICS: Business/Economy; Extended News; News/Current Events
KEYWORDS: bailout; financialcrisis; ratecut
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To: politicket
I believe it's because many of them are deathly afraid of their exposure to the CMO's they've been investing in (sometimes self-sponsored ones).

Yes, they are afraid of the losses they have on their portfolios. They are also afraid to lend today to other banks that may be out of business tomorrow.

They know that they're about to take an enormous hit from this entity that had been 'off the books' for them, but now will be coming home to roost.

You mean SIVs?

That is why I believe that a 1/2 point rate cut will do nothing to free up liquidity in the market place.

It certainly won't reduce liquidity.

Banks are scared - and all they know to do is hoard their money.

You bet. And if we can't help them get over that fear, we're all in trouble.

41 posted on 10/02/2008 11:48:14 AM PDT by Toddsterpatriot (Let me apologize to begin with, let me apologize for what I'm about to say....)
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To: politicket
I believe that Bernanke will announce a 1/2 point emergency reduction by close of business next Wednesday, at the latest.

That will have a disastrous effect on what little 'health' our economy has left.

You never did say why a lower Fed Funds rate will have a disastrous effect or what that effect would be.

42 posted on 10/02/2008 11:50:14 AM PDT by Toddsterpatriot (Let me apologize to begin with, let me apologize for what I'm about to say....)
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To: misterrob
We still have 1 million vacant homes across the country and that's pretty excessive. Housing starts are slowing here quickly, i.e. brick wall effect.

Builders and real estate folk on WRAL bleeding all over the place.

We still have 20,000 unfinished/unsold condos in Miami.

The next POTUS is gonna have a hard row to hoe.

The bankers have messed in their britches and the want the taxpayer to change their diapers.....trouble is the average American is busy paying for fuel and food increases while their gov run retirement funds / corporate 401K retirement funds evaporate.

The average consumer's discretionary income is non-existent, so the market, retail, banking, gov gurus need to factor that in now.

43 posted on 10/02/2008 11:53:56 AM PDT by RSmithOpt (Liberalism: Highway to Hell)
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To: copaliscrossing

I’m ex-Army. My dad and brother (God Bless Them.. both in Heaven now) were ex-Army too. Dad...WWII, Korea and Dominican Republic incursion....CSM 82nd Airbone.


44 posted on 10/02/2008 12:08:26 PM PDT by RSmithOpt (Liberalism: Highway to Hell)
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To: Toddsterpatriot
You never did say why a lower Fed Funds rate will have a disastrous effect or what that effect would be.

Inflationary pressure adding to the inflation that will already be created by the current bailout bill, Bush's $300 billion dollar mortgage bailout he signed July 30th, etc., etc.

45 posted on 10/02/2008 2:32:27 PM PDT by politicket (Palin-tology: (n) - The science of kicking Barack Obambi's butt!)
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To: politicket
Inflationary pressure adding to the inflation that will already be created by the current bailout bill

Inflation? You must be joking.

46 posted on 10/02/2008 2:34:35 PM PDT by Toddsterpatriot (Let me apologize to begin with, let me apologize for what I'm about to say....)
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To: Toddsterpatriot
Inflation? You must be joking.

No. I'm quite serious. And I used the term "inflationary pressure".

47 posted on 10/02/2008 2:46:32 PM PDT by politicket (Palin-tology: (n) - The science of kicking Barack Obambi's butt!)
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To: TigerLikesRooster

Pretty soon we’ll have negative rates, the government will pay us to borrow money! Yee haw!


48 posted on 10/02/2008 2:47:37 PM PDT by Cementjungle
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To: politicket
Deflation is crushing our banking system and you think inflationary pressure is what we need to worry about?

Where will this pressure show up?

49 posted on 10/02/2008 2:50:03 PM PDT by Toddsterpatriot (Let me apologize to begin with, let me apologize for what I'm about to say....)
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To: Toddsterpatriot
Deflation is crushing our banking system and you think inflationary pressure is what we need to worry about? Where will this pressure show up?

The level of our nation's money supply is fine - its just not moving (sort of like it ate a whole loaf of white bread and got constipated).

This thing is going to go in one of two directions.

If everything turns out rosy then that means the economy got extremely constipated, yet enormous pressure was building up in the bowels behind the blockage. If, and when, that pressure is relieved then too low of a discount rate would have added to the inflationary pressure upwards - thereby creating more inflation than was good for our economy.

If everything is headed south then the government is going to do everything it can to stop deflation and Great Depression II. They're going to force liquidity into the marketplace at all costs and keep lowering interest rates to do it. They will also keep churning out bad loans just so somebody will buy something, enticing them with the really low rates. This will continue to perpetuate the credit derivatives problem, because of defaults, and we will be stuck in the same vicious cycle.

50 posted on 10/02/2008 3:16:35 PM PDT by politicket (Palin-tology: (n) - The science of kicking Barack Obambi's butt!)
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To: politicket
The level of our nation's money supply is fine - its just not moving

If it's not moving, where is the inflationary pressure? You ever hear of the velocity of money?

If, and when, that pressure is relieved then too low of a discount rate would have added to the inflationary pressure upwards

What pressure? Oil is down over one third from the peak.

They're going to force liquidity into the marketplace at all costs

Like they are now?

They will also keep churning out bad loans just so somebody will buy something

Or they could buy debt already outstanding.

51 posted on 10/02/2008 3:31:30 PM PDT by Toddsterpatriot (Let me apologize to begin with, let me apologize for what I'm about to say....)
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To: Toddsterpatriot

You and I obviously disagree. I’ve stated my reasons, but am not going to turn this thread into a pissing match between the two of us. The other readers of this thread can watch the events as they unfold, and decide then which argument was correct...


52 posted on 10/02/2008 3:34:12 PM PDT by politicket (Palin-tology: (n) - The science of kicking Barack Obambi's butt!)
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To: politicket
You and I obviously disagree.

Yeah, you're worried about rising prices while deflation is setting fire to our banking system.

Let me know if you see any inflationary pressure. Or if you learn what the velocity of money means.

53 posted on 10/02/2008 3:42:11 PM PDT by Toddsterpatriot (Let me apologize to begin with, let me apologize for what I'm about to say....)
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