Economists Say They Expect the Fed to Cut Rates At Least a Quarter

Yesterday the Fed stated that they expect slower (artificial) economic growth for next year, of around 1.8-2.5 percent. What a bold statement to make, such as increased inflation would be. Economist Brian Bethune says that he believes because the Fed's growth outlook is actually a bit high, predicted rate cuts are a probability by early next year, and could be more than just another 0.25% cut. This is no new news, but is notable because the dollar is falling to all-time lows against other major currencies even this week, and rich celebrities and big oil states in the Middle East, including Saudi Arabia, are all dumping or thinking about dumping the U.S. Dollar, setting off a tidal wave of selling and diversifying; all happening to bail out the crooked corporate banks and irresponsible American consumers.

Bethune said despite the Fed's noncommital position, he expects the central bank to lower borrowing costs further after two reductions that brought the federal funds rate to 4.5 percent.

"The downside risks to the outlook far outweigh the upside risks," he said.

"Thus the Fed's central tendency forecast does look a little rich to us at the current conjuncture, and for that reason we are forecasting that the Fed will reduce the federal funds rate by at least an additional 25 basis points by early 2008."

Financial markets are largely pricing in a rate cut and many analysts see a reduction at the next Fed meeting in December.

"The next FOMC decision will depend on ongoing economic data. However, the minutes published today comfort us in our expectations" for a cut, said economist Marie-Pierre Ripert at Ixis Corporate and Investment Bank.

"We still believe that bad news on the macro side as well as on banks will trigger further easing in monetary policy. A 25 basis-point cut on December 11 remains the most likely scenario even though it could be a close call."

The Fed report projected core inflation expectation for 2008 to 1.70 to 1.90 percent, down from 1.75 to 2.00 percent.