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CNN Live At Daybreak

America Recovers: The Economy

Aired October 02, 2001 - 07:08   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.
PAULA ZAHN, CNN ANCHOR: And Federal Reserve policymakers are expected to trim interest rates by as much as a half point today. It would be the second rate reduction since September 11, if you're counting, and it could bring us to the lowest interest rate level in four decades.

Andy Serwer of "Fortune" magazine is here to talk about today's Fed meeting. I am getting whiplash this morning. Where are you? Hey, Andy, how are you?

ANDY SERWER, "FORTUNE" MAGAZINE: Well, I'm here today, Paula.

ZAHN: So what is your predicting? A half point?

SERWER: I think we're going to get a half point cut. I think a quarter point would be extremely disturbing and disappointing to Wall Street. I don't think the Fed is going to do that. I think you're going to see a half point cut. You know, Wall Street doesn't like to look to Washington for help. In this case, they really are. All eyes are on Wall Street. In fact, the world is on Washington -- in fact, the world is looking to Washington ret now. The trading is mixed in Japan and Europe, traders basically sitting on their hands waiting for the Fed's decision this afternoon.

ZAHN: All right, so walk us through what happens later today if you get a half point reduction in terms of stock prices.

SERWER: Well, actually, I think the market is going to pull back a little bit today no matter what. Certainly if we get a quarter point cut, the market will be very disappointed and we'll see a pretty big sell-off. But I think the market will go down this afternoon even when we get the half point cut and that's because of one of these old Wall Street adages, buy on the rumor, sell on the news. In other words, once the half point cut becomes a reality, people will sell off stocks. I don't think we'll see a dramatic sell-off, but I think we will see some selling.

ZAHN: We also have to look ahead to what's going to happen later on this week with unemployment numbers being officially announced. The numbers are expected to go up to, what, the neighborhood of five percent?

SERWER: That's correct. Yes.

ZAHN: And what are the implications of that then, long-term?

SERWER: Well, right, I think we're going to see, it's a continued sign of weakness in the economy and I think again it will help stimulate Washington to take more action in terms of trying to fix the economy. You're seeing meetings by the president and Fed Chief Alan Greenspan to try to come up with new stimulus packages, ideas. They'll be doing all sorts of, making all sorts of maneuvers to help the economy. But again, it's a sign that we're seeing continued weakness from the September attacks.

ZAHN: It really will create interesting fault lines, will it not, for people who have long argued less government or more government...

SERWER: Well, it's ironic, I think...

ZAHN: ... and at a time...

SERWER: ... that a Republican administration is going to have to do so much bailing out. But I think that President Bush sees it as absolutely necessary. Certainly Congress does and I think Fed chief Alan Greenspan does, as well.

ZAHN: All right, Andy Serwer, thank you.

SERWER: Thanks, Paula.

ZAHN: We'll be checking in with you throughout the morning.

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