EUROLINKS DAILY VIEW
By MICHAEL CONNOLLY
For the first time in months, the economic outlook confronting Federal Reserve policy makers when they meet next week will be little changed from their prior meeting. The U.S. economy is likely in recession, and while the inflation rate is high, a leveling off of commodity prices and rising unemployment should bring it down.
As Greg Ip reports, the officials likely will cut U.S. interest rates a quarter of a percentage point, but a bottom in rates may be in sight. Not cutting rates at all also is likely to be on the table, given persistent concerns about inflation and the magnitude of rate cuts and other steps the Fed has implemented to restore confidence to credit markets.
If the Fed does cut rates, he writes, it might choose to use the statement accompanying the decision to signal that it wants to pause in its rate-cutting to assess the impact of its cumulative cuts -- already three full percentage points since August -- on the economy. But the statement is unlikely to take rate cuts off the table. When the Fed did that last October, deteriorating market conditions forced the Fed to signal a resumption of rate cuts within weeks.Read Greg Ip's report from Washington:
http://online.wsj.com/article/SB120899756185139975.html?mod=djemeurolinks
