Friday, March 14, 2008

So soon?

In early December, this blog predicted a 2% (eventual) Fed rate, but didn't expect to read this so soon:
Likelihood of 100 basis-point rate cut gaining a following
Bear Stearns shocker triggers forecasts for whopper cut to 2%

SAN FRANCISCO (MarketWatch) -- Expectations that Federal Reserve next week will cut rates by a full percentage point, to 2%, gained traction among economists and traders Friday after a bailout of Bear Stearns Cos. revealed more fault lines in the U.S. financial system.
But get this quote from the story: (emp add)
Citigroup economists said they anticipate Fed policy-makers will lower the federal funds rate by a point to 2% next week from the current 3%, "and more cannot be ruled out."
There is very little room between 2% and 0%, and yet there is talk of "more" of a cut than one percent! That would cause the dollar to crater.


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