Ten Down, 11th Rate Cut Looming?

By John S. McClenahen Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee (FOMC) are leaving the door open to an eleventh and presumably, for 2001, final cut in short-interest rates at their next scheduled meeting on Tuesday, Dec. 11. On Nov. 6 the FOMC lowered the influential federal funds rate by 50 basis points to 2%, a level last seen in 1961. At the beginning of this year, the federal funds rate was 6.5%. "Heightened uncertainty and concerns about deterioration in business conditions both here [in the U.S.] and abroad are damping economic activity," the FOMC noted in a statement explaining its Nov. 6 action, the tenth cut the committee has made this year. "For the foreseeable future, the committee continues to believe that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness," the statement said. Translated from Greenspanese, that means the FOMC is likely to reduce rates again next month. Whether it's a 25-basis-point cut or larger will depend in major measure upon the industrial production and unemployment numbers to be published between now and Dec. 11.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish