Will the Fed continue rate cuts thread

[tolbiny]

3 3/4 % prediction

There are a handful of people predicting that BB will continue to cut rates this year, and I'm not reading anything about possible increases in rates (other than people who say that the FED SHOULD raise rates, but none who think that they WILL). Any random speculation, insider info, physic premonitions on what the FED will be doing over the next 3 months?

[DcifrThs]

[ QUOTE ]
3 3/4 % prediction

There are a handful of people predicting that BB will continue to cut rates this year, and I'm not reading anything about possible increases in rates (other than people who say that the FED SHOULD raise rates, but none who think that they WILL). Any random speculation, insider info, physic premonitions on what the FED will be doing over the next 3 months?

[/ QUOTE ]

i think the recent market turmoil is far less significant/will be less impactful than other market turmoils that caused about a 30% drop in the fed funds rate.

it might turn out to warrant a cut down to 3.75, but i wouldn't bet the farm on it.

bill gross has been calling for lower and lower rates for years. then, earlier in 2007, he finally recanted and acknowledged that rates were too low and that he'd expect to see the 10yr move to 5-6.5% in the next few years.

now, he's swinging back the other way. he may be a great bond manager, but i sometimes don't agree with his conclusions.

i can see another cut or two, but it would take a very serious slowdown to warrant rates down to 3.75 in the face of global growth as it is and a falling dollar. i'm sure the housing problem will get worse as ARMs reset and realized defaults rise, but i don't know how much worse.

another 100bps means it got a TON worse without inflation pressures picking up again (which means cap.util has to fall, industrial production growth has to slow a lot more than it has etc.). US slowdown would have to couple w/ eurozone/china/japan continue in a vicious circle.

it's possible but i don't think likely. at worst i'd think the fed funds rate will drop to 4%.

just some thoughts.

Barron