Will This Be the Last Rate Cut?by Tim Manni
Market expectations for the finale of today’s Federal Open Market Committee meeting are that the Federal Funds rate will be cut by 0.25%, lowering it to 2%. The question on everyone’s mind remains: “Will this be the last rate cut of the cycle?” If the result of today’s meeting is different from market expectations, the economic effect could be damaging. The market must be given a chance to prepare for Fed activity.
HSH Vice President Keith Gumbinger believes, “Absent a tremendous new emergency the Fed is done cutting rates. However, within the past six months we’ve had several emergencies, so there remains a chance that rates could be lowered yet.”
Gumbinger points out that, more importantly than change in policy, is the Fed’s characterization of growth and inflation concerns. The need to curb inflation could set the stage for a future rate increase, possibly later this year.
The Fed began to cut rates last September to cope with failing credit markets. At that time the Federal Funds rate was 5.25%.
Check back later today for our analysis of today’s Fed meeting.