No FED Rate Cut Expected
AIG’s ratings downgrade poses a systemic threat that could force a Fed lifeline under rule 13.3 if Goldman and MS cannot put together a loan consortium in 48 hours. The $75 billion may need to be raised to $100 billion if the counterparties force more collateral to be put up. Otherwise, there is a high probability of another Chapter 11 that will have global ramifications in, perhaps, the $trillions.
On another note, there was not one former FOMC member who expects a rate cut. Current Fed officials are supposed to be in a blackout before today’s meeting. I do not expect a cut but anticipate a change in the statement that notes the potential economic fallout from the current crisis. That could be the setup for a possible rate cut by year end if the economy shows no signs of improving.
My contacts tell me also that there has been no discussion of the Fed, ECB and BOE coordinating a rate cut.
Paul J. Markowski
On another note, there was not one former FOMC member who expects a rate cut. Current Fed officials are supposed to be in a blackout before today’s meeting. I do not expect a cut but anticipate a change in the statement that notes the potential economic fallout from the current crisis. That could be the setup for a possible rate cut by year end if the economy shows no signs of improving.
My contacts tell me also that there has been no discussion of the Fed, ECB and BOE coordinating a rate cut.
Paul J. Markowski
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