Wall Street is Asking for More Rate Cuts

While the Federal Reserve just cut rates on the 31st investors are asking the Fed for more cuts ahead.

The reason behind this is because the Federal Reserve hinted after the meeting on the 31st that they were done lowering interest rates. However, there are fresh concerns going around about the credit crunch pushing the US economy into a recession. In the last two days alone, investors have been reading new warnings about the credit crisis from big names such as George Soros, Bill Gross, and Alan Greenspan. In addition to these warnings about the credit crisis, we have seen articles about Citigroup and Merrill Lynch reporting large losses due to delinquent subprime mortgages. In it’s statement last week, the Fed stated that it was just as worried about inflation as it was about an economic slowdown.

With all the talks about no more rate cuts, people forget that the Federal Reserve has always been very data dependent. If the data suggests that they have to cut rates then they will. At the announcements by Federal Reserve board members Randall Kroszner & Fredrick Mishkin yesterday it seems that they both acknowledge that the subprime crisis isn’t ending anytime soon. “We still need to accelerate the rate of inventory liquidation, and that will mean bringing housing starts down and sales up. We have a long way to go,” said Greenspan on a conference from Washington.

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