mj thomson
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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.
(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.
