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CNN Live At Daybreak

Federal Reserve Rate Cut Expected Today

Aired June 27, 2001 - 07:06   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.
BRIAN NELSON, CNN ANCHOR: Now some news on the economy, the Federal Reserve is expected to make an announcement today on interest rates. Chris Huntington of our Financial News Desk in New York is here with a preview if not a prognostication. Good morning, Chris.

CHRIS HUNTINGTON, CNN FINANCIAL NEWS CORRESPONDENT: Hi Brian, how are you? Well, I'm not going to make a bet here, but there's virtually no question on Wall Street and among the nation's top economists that the Federal Reserve will indeed cut interest rates today. It's pretty much a toss-up right now whether they cut by a quarter-point of half a point.

Earlier in the week, they were probably leaning towards a full half-point cut. However, some signs of economic strength in the form of a pop-up in consumer confidence, good news on home sales, and increased orders for so-called durable goods have led some people to believe that the Fed might be able to back off a little bit and maybe just do what they call 25 basis points -- Brian.

NELSON: Is there any danger of too large an increase?

HUNTINGTON: Well, I think probably not. There's some concern on the fringes that if the Fed is too aggressive with its rate cuts that it may spur inflation, but there's really no evidence of inflation and indeed, the Fed has been quite -- almost uncharacteristically outspoken in saying that inflation is not a threat right now.

NELSON: There's a bit of a conundrum here, though, as you readily pointed out, consumer confidence is up, big ticket sales are up, home sales are up. Yet, jobless figures are also going up, so how does -- how does Mr. Greenspan square one with the other?

HUNTINGTON: That is indeed the double-edged sword of the economy right now and the lagging weakness in the -- persistent weakness in the jobs market is probably the greatest concern and no doubt the Fed is focused on that. The thinking right now is that that weakness in the job market will have the potential to erode the strength in the housing market, for instance. So as people become more and more concerned about the security of their jobs, they might back off some of the big purchases, particularly in housing.

NELSON: All right, thank you, Chris Huntington from our Financial News Desk in New York. Thanks for being with us.

HUNTINGTON: You're welcome.

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