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      schrieb am 02.10.01 14:17:24
      Beitrag Nr. 1 ()
      Tuesday October 2, 1:41 am Eastern Time

      Fed to Act Forcefully to Fight Recession

      By Caren Bohan

      WASHINGTON (Reuters) - The Federal Reserve is expected to act boldly to counter damage to the U.S. economy from the Sept. 11 attacks, slashing interest rates by a half percentage point for the second time in just over two weeks.
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      A majority of experts think the Fed on Tuesday will judge a half-point cut to be warranted even though policymakers will have little in the way of hard data on which to base their decision.

      A rate reduction that size would bring the federal funds overnight lending rate to 2.5 percent -- a 39-year-low -- from its current 3 percent. It would also mark the ninth Fed cut this year.

      ``We`ve got hit with something we have never seen before,`` said James Glassman, economist at J.P. Morgan in New York. ``As the economy absorbs these shocks, it`s appropriate for the Fed to be stepping on the gas as much as it would in a recession.``

      With the exception of weekly jobless claims, most available government data have yet to reflect the impact of the airplane attacks that demolished the World Trade Center, crushed part of the Pentagon and left more than 5,700 people dead or missing and presumed dead.

      But anecdotal signs of economic disruptions abound, as airlines and tourism go begging for customers and as private surveys show consumers are gloomy and worried for their jobs.


      STOCKS BOLSTER CASE

      Further bolstering the case for Fed action, analysts said, is the stock market, which suffered its worst sell-off since the Great Depression in the week following the attacks.

      It rebounded a bit the week after that but drifted lower again on Monday.

      ``My guess is that the Fed will do 50 basis points,`` said former Fed Vice Chairman Alan Blinder, who is now a professor at Princeton University.

      ``My thinking is that the Fed is expecting a recession, perhaps a sharp recession, and that changes the calculus,`` Blinder said. ``Prior to Sept. 11, they were looking to find an end to their rate-cutting cycle.``

      The Fed made its last cut in rates on Sept. 17, just as major stock exchanges in New York were resuming business after a four-day closure as the city worked to clear away hundreds of thousands of tons of rubble in lower Manhattan.

      In a Reuters survey taken on Friday of firms that deal directly with the Fed in fixed-income markets, 21 forecast the central bank would reduce the 3 percent federal funds rate by a half-point. Four predicted a quarter-point cut.

      The Fed meeting was scheduled to begin at 9 a.m. EDT. A decision was expected around 2:15 p.m.

      Although financial market participants were confident a credit easing was in store, Fed Chairman Alan Greenspan did little to tip his hand about the upcoming meeting.

      Analysts said he has not had to offer much guidance since the vast majority of economists have been warning about the toll that the attacks will take on an economy that was weak well before hijackers took control of commercial jets and crashed them into U.S. landmarks. Most economists are convinced the U.S. economy is already in a recession.


      GREENSPAN ADVICE TO CONGRESS: GO SLOW

      In testimony to the Senate Banking Committee on Sept. 21, the Fed chief urged Congress to take a cautious approach to plans for a new stimulus package to help the economy.

      ``I would strongly suggest that while there is an obvious strongly desired sense to move rapidly, that it`s far more important to be right than quick,`` he said.

      Glassman said the desire to show lawmakers that the Fed is working hard itself to stimulate the economy provides an added reason for a 50-basis-point cut as opposed to only 25.

      ``He`d rather shoulder the load with monetary policy,`` said Glassman, who noted that Fed policy is more nimble than fiscal policy. ``Unlike Fed policy, once you have passed spending and tax measures, you can`t reverse them very easily.``

      However, Ken Mayland, president of Clearview Economics in Cleveland, Ohio, said the go-slow approach may be appropriate in the case of monetary policy as well.

      Mayland said the economy has quite a bit of stimulus in it already because of the eight earlier Fed cuts and President Bush`s 10-year tax cut signed into law in June.

      ``We`re getting to such a low level of interest rates that there`s not much advantage to lowering them further,`` he said.

      Mayland thinks the Fed will lower rates but only by a more cautious quarter-point.

      Among the few fresh reports the Greenspan and his colleagues have been able to review is last week`s jobless claims data from the Labor Department. Initial applications for unemployment benefits shot up by 58,000 to 450,000, a nine-year high, in the week ended Sept. 22.

      Consumer confidence surveys have also painted a grim picture.

      The University of Michigan`s final consumer sentiment index fell in September to 81.8, its lowest level in nearly eight years, from 91.5 in August.

      Richard Curtin, who works for the university, told reporters on Monday that the attacks had a ``significant`` impact on consumer confidence, inspiring ``the worst bout of pessimism since 1990`` in the two weeks after Sept. 11.
      Avatar
      schrieb am 02.10.01 18:17:33
      Beitrag Nr. 2 ()
      Meine alte Frage:

      Warum tut die Fed das, in ihr müßten doch Wirtschaftswissenschaftler
      sitzen, die Wissen, das man Konjunkturzyklen nicht ausschalten kann.


      Wovor haben die also Angst?


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      Fed to Act Forcefully to Fight Recession