Posted on: Sunday, October 28, 2001

Personal finance
Fed likely to cut rates yet again

Associated Press

No region of the country has escaped the economic fallout from the terrorist attacks, the Federal Reserve said last week, prompting analysts to predict an increased likelihood that the central bank will cut interest rates for a 10th time this year when its policy-makers meet Nov. 6.

Releasing its latest survey, compiled from reports from its 12 regional banks, the Fed said the attacks had depressed consumer spending, forced cancellation of orders to manufacturing companies and caused widespread layoffs.

"Layoffs and plants closings have been reported in many industries from financial services on the East Coast to media and advertising on the West Coast to auto parts in the central states," the report stated.

Most economists said the new report made a 10th rate cut all but inevitable. Many predicted the reduction will be the larger half-point that the central bank has used for most of this year.

The Fed has cut rates by 4 percentage points since Jan. 3, pushing its key federal funds rate to 2.5 percent, the lowest level in nearly 40 years.

"I think the Fed will cut by a half-point because of the mushrooming and spreading weakness in the economy and also because anything less would disappoint the markets," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.