Economists split on what Fed will do
The Fed has not cut inflation since setting it at 2 percent in April, largely because of inflation fears. But turmoil on Wall Street could persuade Fed members to end that steady streak. Jeremy Hobson reports.
Federal Reserve seal on $100 bill (iStockPhoto)
More on The Economy, Wall Street, Fed. Budget/Govt. Spending, America's Financial Crisis
TEXT OF STORY
Scott Jagow: The Federal Reserve is surely in crisis management mode. This morning, it poured another $50 billion into the financial system. And there's a chance the Fed will cut interest rates this afternoon, which was not supposed to happen. Here's Jeremy Hobson.
Jeremy Hobson: Fears about inflation have kept the Federal Funds rate steady at 2 percent since April. But some economists think the last 48 hours may be enough to sway the Federal Open Market Committee to cut the rate by 25 basis points, or a quarter percent. Morris Davis is a former Fed economist who now teaches at the University of Wisconsin.
Morris Davis: It's just not clear what the Fed's gonna do. I suspect we'll see 25, but I'm gonna guess that there are gonna be some members of the FOMC that are gonna say we should do nothing.
Doing nothing is what John Silvia expects.
John Silvia: Oh, I've been around long enough to see mornings like this before.
Silvia is Chief Economist at Wachovia.
Silvia: The Fed has to keep open that possibility that if you look at the second half of this year we easily could get negative GDP growth.
If things do continue to deteriorate, Silvia says the Fed may well cut the rate at or before its next meeting in October.
In New York, I'm Jeremy Hobson for Marketplace.
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From Long Beach, MS, 09/16/2008
Just heard interesting conversation on "Power Lunch" CNBC...re bailouts by Fed with no punishments,etc. Recognizing the government is not supposed to make a profit, I wonder if the Fed could impose a surcharge if they "bailout" and then designate the proceeds of the surcharge to various government programs such as funding for: low income housing, job training for areas adversly effected by the industry "bailed out" , funding consumer education in all of our nations high schools (hopefully having a more prepared citizen entering into the adult financial world, etc. I'm sure there are many more worthy areas where the "surcharge" is sorely needed. Is there a way for these companies to pay some price for their part in this crisis and the government not to retain a monetary profit but to pass it on to various needy pockets in society???
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