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CNN Live At Daybreak

Federal Reserve Starts Two-Day Meeting

Aired June 24, 2003 - 06:17   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CAROL COSTELLO, CNN ANCHOR: Time for a little business buzz right now. The market saw a sell-off ahead of today's Federal Reserve meeting.
For more on the upcoming decision and interest rates and a preview of today's market action, we go to Carrie Lee at the Nasdaq market site. She has it all this morning.

Good morning -- Carrie.

CARRIE LEE, CNN FINANCIAL NEWS CORRESPONDENT: Good morning, Carol.

A quick recap on yesterday, the Dow Jones industrials closed lower by about 1.4 percent. The Nasdaq sold off 2 percent at the close. And the big economic story of the week is the two-day Federal Reserve meeting.

Now we're going to get the official decision on whether the Fed decides to cut interest rates once again tomorrow at about 2:15 Eastern and Wall Street widely does expect a rate cut. Now a lot of people say that a quarter percentage point cut is already priced into the market. However, if we see a cut greater than that, perhaps half a point, then that could be a little bit of a surprise factor.

The interesting thing here is that good news or bad news? That is, if we see a half point cut, does it almost show a sign of desperation on the part of the Fed to really try to stimulate the economy or is it just the Fed being careful, trying to really get things going?

Let's take a look at where we are right now because the Fed has obviously cut rates a lot. In fact, this would be the 13th rate cut that we've seen since early 2001. Right now you can see that the Federal Funds Rate, and this is the rate that banks use to borrow money, is -- stands at 1.25. That is a 41-year low. So if we see another rate cut this week, that's going to put us at levels not seen since the 1950s.

Now obviously the whole point of a rate cut is to try to stimulate consumer spending, as well as business spending. A couple of things that still remain sticking points in this economy, a lot of people think we have seen the worst, but unemployment is still relatively high, standing at 6.1 percent, and then we've heard the D word, deflation. That is an overall lowering of prices and that's not good news for our economy. That's rather bearish. And then finally, Carol, not only are people going to be watching for the cut, but they want to hear what Federal Chief Alan Greenspan has to say about economic conditions going forward. Are they seeing weakness or are they seeing signs of an improvement? And in a way that's almost the most important thing, looking forward, trying to gauge what's ahead because stocks always move ahead of the markets.

COSTELLO: That's right, state of mind is very important to the market, isn't it.

Carrie Lee, we'll get to the futures in the next half hour, many thanks.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com






Aired June 24, 2003 - 06:17   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: Time for a little business buzz right now. The market saw a sell-off ahead of today's Federal Reserve meeting.
For more on the upcoming decision and interest rates and a preview of today's market action, we go to Carrie Lee at the Nasdaq market site. She has it all this morning.

Good morning -- Carrie.

CARRIE LEE, CNN FINANCIAL NEWS CORRESPONDENT: Good morning, Carol.

A quick recap on yesterday, the Dow Jones industrials closed lower by about 1.4 percent. The Nasdaq sold off 2 percent at the close. And the big economic story of the week is the two-day Federal Reserve meeting.

Now we're going to get the official decision on whether the Fed decides to cut interest rates once again tomorrow at about 2:15 Eastern and Wall Street widely does expect a rate cut. Now a lot of people say that a quarter percentage point cut is already priced into the market. However, if we see a cut greater than that, perhaps half a point, then that could be a little bit of a surprise factor.

The interesting thing here is that good news or bad news? That is, if we see a half point cut, does it almost show a sign of desperation on the part of the Fed to really try to stimulate the economy or is it just the Fed being careful, trying to really get things going?

Let's take a look at where we are right now because the Fed has obviously cut rates a lot. In fact, this would be the 13th rate cut that we've seen since early 2001. Right now you can see that the Federal Funds Rate, and this is the rate that banks use to borrow money, is -- stands at 1.25. That is a 41-year low. So if we see another rate cut this week, that's going to put us at levels not seen since the 1950s.

Now obviously the whole point of a rate cut is to try to stimulate consumer spending, as well as business spending. A couple of things that still remain sticking points in this economy, a lot of people think we have seen the worst, but unemployment is still relatively high, standing at 6.1 percent, and then we've heard the D word, deflation. That is an overall lowering of prices and that's not good news for our economy. That's rather bearish. And then finally, Carol, not only are people going to be watching for the cut, but they want to hear what Federal Chief Alan Greenspan has to say about economic conditions going forward. Are they seeing weakness or are they seeing signs of an improvement? And in a way that's almost the most important thing, looking forward, trying to gauge what's ahead because stocks always move ahead of the markets.

COSTELLO: That's right, state of mind is very important to the market, isn't it.

Carrie Lee, we'll get to the futures in the next half hour, many thanks.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com