US interest rate cut

mj thomson

Newbie
4 0
This is my first post and I thought I would kick off with the field that I am meant to be an expert in.

(hope this is the correct place for it, ps great bb)

I am now starting to agree with some analysts, that we could be seeing a cut that is greater than 50bp. The consumer confidence survey released today will worry Greenspan. Furthermore the NAPM survey released earlier this month (which I understand is a key indicator for Greenspan) has also shown a marked decline.

Meanwhile inflationary wories are subdued. Wage settlements ticked up a little in December, however I believe this was mainly due to bonuses - underlying wage growth remains a non-inflationary factor. Consequently Greenspan has a great deal of room to cut rates without igniting inflation. I have even heard talk that Greenspan could bring rates down (over the course of the next six months) TO around 1%-2% [one to two percent - no typo], if this was necessary. The STRUCTURE of the US economy is thought to be such that stag-flation is highly remote (barring external shocks ie a oil price hike), hence creating the freedom for significant rate cuts.

I am going to stick my neck out and plump for a 75bp cut. He has all the reason he needs for this, and hence is likely to do so. A 100bp cut, could cause more harm than good, shocking the markets into believing the economy was in a worse state than previously believed. Any falls in the markets, would further reduce consumer confidence, defeating the purpose of the rate cut.
 

Cigar

Well-known member
292 13
welcome MJ, good to read your considered comments. I'm sure everyone will look forward to regular postings.

rgds
 

Uncle

Established member
671 2
Welcome to the "club" M J. Yes you posted in the right area and look forward to you further informed posts.