25 or 0?

It’s the Fed rate decision time again.

However, unlike the last meeting in September when the predictions on what the central bank would do were focusing on how much, not if, this time it’s a little bit uncertain.

The August negative job report released in early September, which probably have played a key role in the 50-basis point rate cut decision, turned out to be a false alarm. The credit squeeze appeared easing, though big banks wrote down billions of dollars of assets tied to bad loans. And the economy grew a solid 3.9% last quarter despite the turmoil in the financial market in the summer. Consumers are still spending though the housing market slump continues and oil price reaches record high.

Then what we need right now is a policy that will prevent the economic environment from worsening, not cure when it already happened. Another 25-basis point reduction could offer an assurance that the Fed is determined to stay ahead of any potential economic weakness.

So 0 or 25? My guess is 0 this time. The surprising larger-than-expected cut from last month may need a little more time to walk through the economic chain and show how it affects the economy. Plus, I don’t want to see my bank’s savings rate drop again

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