Magazine article American Banker

Bad News Raises Pressure for More Easing

Magazine article American Banker

Bad News Raises Pressure for More Easing

Article excerpt

Bad News Raises Pressure for More Easing

NEW YORK - The recent spate of weak economic indicators and financial markets' adverse reaction to mere suggestions of a federal fiscal stimulus leave the Federal Reserve with little choice but to ease monetary policy again, economists said.

The Fed's real concern, said Chemical Bank economist Henry Engler, is to prevent the type of decline next year that would cause much greater job loss and income loss. If evidence continues to point toward economic weakness, then the Fed will ease further, he said.

There is little argument among economists and administration officials that the recovery is lagging. Last Wednesday, President Bush called the economy's performance "unacceptably sluggish."

Jobless Claims Rise Again

Jobless claims for the week ended Nov. 2 rose by 39,000, to 493,000, the highest level since April 20, when the economy was still in recession. The rise in claims, economists said, points to a likely decline in November in nonfarm payroll jobs.

The nonfarm payroll data, together with the national unemployment rate, will be reported Dec. 6.

Some economists said they believe the monthly jobs data will catalyze another quarterpoint cut in the Fed's target for federal funds, which is now seen at 4.75%.

Such a move might come before the Dec. 17 meeting of the Federal Open Market Committee, which sets near-term Federal Reserve monetary policy.

A Quarter-Point Cut?

"I think they will ease 25 basis points - before" the committee meets, said Alan Lerner, an economist and managing director at Bankers Trust Co. …

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