Surprise Rate Cut Unlikely Despite Recession Fears

CNBC:

Despite the growing chorus on Wall Street predicting a recession this year, economists say the Federal Reserve is unlikely to cut interest rates before its regularly scheduled meeting later this month.

Even those economists who view the November spike in unemployment as an ominous sign say that a rare intra-meeting rate cut is neither necessary nor appropriate.

"There's a real bias against that, unless it is a real emergency," says Bank of Tokyo-Mitsubishi-UFJ's senior financial economist Christopher Rupkey, who says a recession is now a fait accompli.

"If they change policy it will spook the markets, saying things are so bad they can't wait, " adds Robert Brusca, chief economist at FAO Economics. "I don't get the sense that there is support for that kind of cut right now."

Read the whole story: CNBC

Comments

[loki]

I was wondering today if one of the factors why we are in such bad shape these days , besides the fact that credit is giving to everyone and for just about any amount, is that with having such low interest rates for the past 10 years, who even considers savings? Low interest rates pushes people to the market to seek sustainable growth of their money. That is were the small investor , under million total worth, loses and the investment companies win big. The promises of 10% on money really meant by the time the fees are taken out you are seeing maybe even less than you would in a CD or savings account.
No matter what, we are just screwed.

[sammy333]

I understand that the FED job is to only save the bankers, rather than save the country from an economic catastrophe.

The catastrophic drop of the dollar caused by the excessive rate cuts makes one country after another to drop dollar and switch to euro (or other currencies). Brasil, Russia, China, ... move to change their long term policies one after another.

[curiousasheck]

In the end, the long-term health of the US economy is going to be more important than whether stock buyers have a gain or loss, or even whether there is a year-long recession. The fed has done whatever it could to help investors and speculators. Rates are going up, a recession is needed and is coming, and stocks are going to reflect those realities. Time for investors to suck it up and be honest with themselves about what's coming.

[curiousasheck]

Face it. We're going to hit the rocks no matter what the Feds do.

[yappnmutt]

its not a liquidity problem. its a solvency problem. rate cuts won't help a solvency problem. there is an inflation problem. raising rates usually take care of that problem. raising rates now will trash what's left of the economy. lowering rates will trash the dollar(which will cause consumer product and gasoline inflation). the fed is kinda stuck. i say we punt, drink a beer and watch the game.

[OneVoiceInACrowd]

Mr. Kemp, RSU, where are you?

[MajorKong]

My advice - start drinking heavily.

[yambartsumian]

Why should they care? They probably have enough money to sit rich while the rest of the economy crumbles. Really, we should all just quit worrying and believe Bush in that our economy is strong and we will not face a recession... let's just ignore all of the evidence to the contrary.

[VivaZapata]

if the federal reserve holds firm and does not lower interest rates, there may yet be hope to avoid collapse. however, it's a damned if you do and damned if you don't situation. the bottom line is can the dollar afford to drop anymore? the answer is NO.

[thepainter57]

Digging The Economic Hole Deeper
Submitted by Bill Scher on January 8, 2008 - 4:29pm.
Last month, President tried to give a "don't worry, be happy" pep talk on the economy, only to be confronted with an actual voter, and being forced to acknowledge the economic "storm clouds."

Yesterday, in another economic speech, Bush was compelled to scale back the happy talk -- admitting, "We confront economic challenges," while begrudgingly conceding, "recent economic indicators have become increasingly mixed."

Ya think?

Unsurprisingly, Bush offered the same conservative elixir that already has failed to improve the economy for middle-class and impoverished families: reckless tax cuts.

That's because the conservative movement is not interested in having our government play a role in strengthening our economy. They're interested in coming up with excuses for more tax cuts so they can hamstring our government from working for us.

Tax cuts can certainly have a role to play to cushion the blow of an oncoming recession -- if they are temporary and geared towards the people being pinched, or crushed, by the faltering economy.

But Washington conservatives are not interested in economically potent tax policies. They're won't acknowledge past failures and offer new ideas.

They're simply interested in more handouts to those who are wealthy enough to be shielded by economic downturns.

Bush already tried that. It didn't lead to significant investment or employment growth. It didn't help raise average family income. It didn't fight poverty.

Furthermore, the Bush conservatives antipathy to effective government prevented them from having a long-term public investment strategy: investing in universal health care, renewable energy and quality education.

Such a strategy creates living-wage "green-collar" jobs, makes income go farther, and protects young adults from debilitating debt.

No tax cut can magically make those things happen, which is why none of that is happening now.

While Bush mouths the words "strong foundation" for our economy, the truth is without progressive investments, our foundations have weakened.

Reckless tax cutting did not create an economy that works for everyone. And it won't now.

[mmckinl]

The privately owned and operated Federal Reserve is in a box. They need more money in the system but those that need loans can't get them and those that can get loans don't want them or are actually paying them off. They can only create new money through debt , but that ain't working.

With a Public Owned Central Bank using 'greenbacks' we wouldn't have this problem.

[ajax2]

"Surprise Rate Cut Unlikely Despite Recession Fears"

There is nothing in Fed comments to support this headline. In fact some Fed officials have recently stated they are ready to cut immediately.

[mmckinl]

In a confidence game, you can't spook the players.