Fingers crossed for a rate cut?

Amy Scott Aug 13, 2007
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Fingers crossed for a rate cut?

Amy Scott Aug 13, 2007
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TEXT OF STORY

Doug Krizner: To say the financial markets have turbulent recently would be an understatement. They’ve been downright treacherous, for many: investment banks, hedge funds, mortgage companies. Credit conditions have become so difficult, the bet is the Federal Reserve will have no choice but to lower interest rates, and soon. But as Amy Scott reports, that’s not easy.


Amy Scott: The Fed’s in a tough spot. On one hand, its job is to fight inflation. Recent data has shown that labor costs and import prices are on the rise.

But Fed officials are also concerned about the global credit squeeze wreaking havoc on the capital markets.

The Fed’s been pumping money into the system to stabilize interest rates. Many investors would like to see the Fed go further and actually cut interest rates to get money flowing again.

But a rate cut might stimulate inflation. Mike Englund is chief economist with consulting firm Action Economics.

Mike Englund: Our read is that the Fed probably doesn’t perceive much benefit to a rate cut. In fact if anything, it might just add to the panicked spirit of the market.

That hasn’t stopped some investors from hoping. The Fed’s next meeting is scheduled for mid-September.

Some Fed watchers predict officials will call an emergency meeting before then.

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

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