February 14, 2008

EVEN 1% WON'T BE LOW ENOUGH...:

How Low Will the Fed Go?: Chairman Bernanke is hearing it from all sides, but the rate doves appear to have the upper hand (Peter Coy, 2/13/08, Business Week)

Investors seem to expect that big cuts will win the day. As of Feb. 13, the fed funds futures market was betting the funds rate to be cut from 3% to 2.5% at the next Fed rate-setting meeting on Mar. 18, according to a Bloomberg Financial Markets calculation. Further out, the futures market anticipates the fed funds rate will go to 2% by June.

Robert DiClemente, Citigroup's (C) head of U.S. economic and market analysis, is predicting a bottom of 2.25% but concedes it could well go lower. Says DiClemente: "There's this very nasty chemistry between economic weakness and financial instability and back. It just keeps feeding on each other until the Fed breaks the circle." One of Wall Street's biggest bears, David Rosenberg, North American economist for Merrill Lynch (MER), thinks the funds rate will hit 1%.


...when there's an oil/gold correction.

Posted by Orrin Judd at February 14, 2008 7:52 AM
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