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American Morning

The Federal Reserve's Could Cut Interest Rates Again Today

Aired December 11, 2001 - 08:33   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: The Federal Reserve's Open Market Committee meets today and could cut interest rates again today, for what, the 12th time this year. Will it help out the economy? Our Andy Serwer is here with a look, "Fortune" magazine's -- are you the editor-at-large?

ANDY SERWER, "FORTUNE" MAGAZINE: We wanted to say the editor living large, but they wouldn't let me do that, so I will take editor at large, right, nothing wrong with that, right?

ZAHN: I'll take you anyway. Now let me ask you this, there is no doubt that this is going to happen.

SERWER: Right, I think this will be the biggest nonsurprise, and Wall Street will be floored if the Fed didn't cut rates today. That will be a 2:15,putting the fed funds rate down at 1.75, if they do cut by an expected quarter point, the lowest for 40 years. And you know there's a lot of questions, Paula, does this matter? Has it been making a difference? Will this get out of recession? More and more, as I look back over the past year, I think the Fed cutting interest rate has helped, OK, because what it has done is it's kept consumer spending -- look at auto market. The interest rate level on that is zero. That's because the Fed has been cutting, and because interest rates are low. So it's helped there. It's certainly helped the housing market.

ZAHN: Aren't those are two of the few sectors where you've actually seen an increase in numbers.

SERWER: What you have to look at -- this is sort of like the economy having the flu, right, and the interest rate cuts are like Aspirin and Robitussin. It's not curing you, but it is making you feel better, and I think that's really, really important, because this recession came about because of excess inventory. At Y2K, companies starting making too many computers to replace the ones that may be out of date back when the century changed, and so we have to work off that inventory.

So the fact that the Fed is cutting rates is helping us get through this period until we work off this inventory. It's definitely helping out the economy. And I look for the Fed to cut today, and I also look for the Fed to cut probably in January as well.

ZAHN: How much today? SERWER: A quarter point I think is what we're going to get, widely expected.

ZAHN: If that happens, how do you think the markets will react?

SERWER: I don't think the markets will respond at all, because it's so very much in the cards. The futures are up this morning, but I think that's mostly because the Finnish phone giant Nokia is saying that its sales are much better than expected. And again, we're saying some important news on the tech front. Some of these tech companies really saying that businesses are bottoming out, are getting better, like Nokia this morning.

ZAHN: Andy Serwer living large here at CNN.

SERWER: Or trying to.

ZAHN: "Fortune's" magazine editor at large.

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