Wall Street Journal's Greg Ip Says Fed May Take "Breather" After Cut Next Week

MortgageNetDaily ^ | 042408 | Adam Button

[Fred]

Expectations for a pause in U.S. monetary policy were bolstered by an article in Thursday's Wall Street Journal, where noted Fed watcher Greg Ip said, "The Federal Reserve is likely to cut its short-term interest rate by a quarter of a percentage point next week -- but then may be ready for a breather."

However, the Journal article also points out that a pause in rate cuts would not necessarily signal the end of the financial turmoil in the U.S. economy. "It is almost certain to signal continued concern about economic growth and a willingness to cut rates further if the outlook worsens," Ip wrote.

The FOMC will announce its rate decision on April 30. Economists expect a 25bp cut to bring the Fed funds rate to 2.00%.

Ip also said the Fed is concerned that further easing could aggravate rising inflation expectations as food and oil prices soar to new records. Concerns about inflationary pressures "means the option of standing pat will likely also be on the table," Ip wrote.

Fed fund futures imply a 90% chance of a 25bp cut with a 10% chance of no change. Looking further out, futures show a 19.8% chance of a second cut at the June 25 FOMC meeting, unchanged from a day earlier.

[John123]

but then may be ready for a breather.

That's not saying much since the interest rates are so low anyway.

I could say that Osama Bin Laden is due for a breather since he stuck his foot in his mouth so many times already...

[illiac]

I’m waiting to refi for when the interest rate hit minus 2.25%.....

Probably wait forever...

At the rate they are going, they will not have much leverage left to lower the rate.

[Always Right]

I think it will sit at 2% for a while. The inflation in food and oil have nothing to do with monetary policy. The fed just needs to sit back and let their cuts work.

[JSDude1]

I have little faith in the disterous Federal Reserve.