Looking for a rate cut

Amy Scott May 9, 2007
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Looking for a rate cut

Amy Scott May 9, 2007
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TEXT OF STORY

BOB MOON: Most analysts were left scratching their heads the last time Fed chairman Ben Bernanke and company made their pronouncement on interest rates. The monetary policymakers held steady then, and they’re expected to hold the line again today at 5.25 percent. This time around, though, analysts and investors are hoping they’ll get a clearer signal on whether a rate cut might be on the horizon. Here’s Marketplace’s Amy Scott:


AMY SCOTT: The Fed stopped raising interest rates almost a year ago. Since then, the statement it’s released after each meeting has warned about inflation, suggesting interest rates might have to rise to curb rising prices.

But after weak employment and housing reports, some analysts don’t expect the Fed to include an inflation warning in today’s statement.

JAY BRYSON: If they drop that, that means that they’re moving even more back to the possibility of a rate cut.

That’s Wachovia economist Jay Bryson. Some Fed watchers expect a rate cut as early as next month to stimulate the economy.

But currency strategist Marc Chandler, with Brown Brothers Harriman, says inflation may still be a problem. So far, the troubled housing market hasn’t dragged down the wider economy.

MARC CHANDLER: And we’ve got 4.5 percent unemployment. That is regarded as tight labor conditions by almost any measure.

Chandler expects the Fed to raise interest rates to tame inflation, but not until at least later this year.

In New York, I’m Amy Scott for Marketplace.

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