Rate Cut 1/2 or 1/4

Discussion in 'Trading' started by Point Man, Jun 24, 2003.

  1. Tomorrow is what dreams are made of. Will the Fed cut rates by a half or will they cut by a quarter? Truthfully, the pit traders I speak to want a half and most are anticipating a half. To them a half means no more rate cuts in the future and then we can begin to price in rate increases. If we get a quarter or a half, there are no rate rises to be priced in for years to come. There is an election next year. You do not raise interest rates before an election. The Democrats will be all over a rate increase. Look for a 1/4 this time around with more to follow in the fall.
  2. Ah, good topic. There was an interesting interview today of a couple of former Fed governors. One actually said that the market "wants a 50 bp rate cut." My immediate reaction was, oh man, if the Fed is really thinking this way, then they are on glue. But then the other one came on and asserted 25. My instinct is that the 25 bp choice is the course least likely to tank the market. Some traders believe that a 50 bp rate cut means the Fed is out of bullets, but of course the Fed is never really out of bullets; however, my gut trader instinct is to short the shit out of any spike after a larger cut. Until the next round of economic numbers appear confirming that the economy is picking up, then there's little reason to buy imo, and any action will be dictated by the next round of earnings. The wrench in this scenario is the correction that has occurred before the meeting; ideally, we would have lofted right into the meeting, but of course the market never accommodates. The remaining option is no rate cut whatsoever. Although perverse, would it not signal that the Fed has confidence in the economy and therefore any sudden drop to such a decision would present a buying opportunity? I typically like to fade any spikes either way and then stick with the contra, but we have had as many as 3 or 4 contras the past few meetings, so I'm probably going to abstain tomorrow except in the 50 bp scenario, if it develops.

  3. 50 is bs. Fixed income folks are already starving to death , unless they locked in higher rates years ago.

    Is business so bad we need free money?
  4. bobcathy1

    bobcathy1 Guest

    If they make the damned rate any lower.....
    we are going to have to PAY the bank
    to keep our money!!!!!

    Rate cuts send a message to the markets alright!

    Greenspan please get a grip on yourself
    and start raising the interest rates!!!!

  5. i dont think they are on glie to follow teh market, most times the fed just does wwhat the market prices, or "wants" and the fed just acts as a rubber stamp... i think the fed would always be better to allow the free market to decide...
    imo... they cut 1/4 and leave the door open for more cuts
  6. talk of an increase, as crazy as it sounds could be good stimulus, all teh business owner and people wo want to purchase or borrow money feel no hurry and motivation b/c rates are down, are staying down, and if anything are goind down further....
    hike a 1/4 or just leave teh bias for a hike and it signals hey th eparty is over, get off your a$$ and buy soem stuff while rates are low!!!!!

    banks are going to be able to charge more for checking accounts, etc... i think it will be good pricing power, i am still bullish financials
    good point bobcathy
  7. McCloud


    I also think interest rate levels should be decided by the free markets based on supply and demand. No one can spin the economy, the rate manipulation can only delay things imo..


    My sentiments also. This bs of continuing to lower rates is garbage. Reaching the point of desperation with further cuts.
  9. I actually don't think the rates will be cut by the fed. I think they will hold steady and neutral bias with some hint at possible signs of economic recovery.
  10. I''d agree. If anything they should keep it fixed and focus on increasing the money supply. Credit is already cheap. All we need is an injection of liquidity to get businesses to take advantage of it. The last thing we want is more air in the real estate bubble.
    #10     Jun 25, 2003