Federal funds cut coming?? or is the bomb still ticking ???

 Most of the economists we surveyed think the Fed will cut its federal funds target rate at the September meeting or perhaps sooner. The FOMC's statement that it "is prepared to act as needed" is an explicit signal that a cut before Sept. 18 is not out of the question.

 

It will all depend on what happens in the credit markets over the next weeks and months, said Stanley, the Greenwich Capital economist. "Whether the Fed cuts the funds rate or not will be determined by how bad market conditions get -- period, end of story." But others say the economic situation is worsening enough to justify lower rates from the Fed, regardless of whether credit markets recover.

In its statement Friday, the FOMC acknowledged that the risks of slower growth had increased."If the Fed does cut, it will be rooted ultimately in the collapse of the U.S. housing market, which we have consistently emphasized as the main force driving the U.S. slowdown," wrote Goldman Sachs economists in a note to clients.

"Even if the current financial distress subsides quickly, the downturn in the housing market still has a long way to run," Goldman economists said.

Some economists believe the Fed won't have to cut the federal funds rate. "This should provide confidence and allow liquidity to flow to mortgage financing and we do not think that the market will require another cut from the Fed," wrote John Ryding, chief economist for Bear Stearns, in an email.

 

Let's ALL hope for a cut SOON.............

 

AC