Expectations Rise For 50 Basis Point Rate Cut

By John S. McClenahen As June 25 comes closer, expectations are rising that Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee (FOMC) will opt for a 50-basis-point cut in the influential federal funds target rate. For example, David A. Rosenberg, chief North American economist at Merrill Lynch & Co., New York, notes that futures "are appropriately priced for a 2-in-3 chance" of a 50-basis-point cut in the rate to 0.75%. The target rate has been at 1.25% since Nov. 6, 2002, when the FOMC lowered it 50 basis points from 1.75%. The FOMC begins a two-day meeting on June 24, with an announcement of its decision on the federal funds target rate expected about 2:15 p.m. Eastern time on June 25.

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