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Federal Reserve Meets Today, Amid Signs of Weaker EconomyAired December 19, 2000 - 1:01 p.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU WATERS, CNN ANCHOR: And six days before Christmas, forget about sugar plums -- many Americans have visions of lower interest rates, today. The Federal Reserve officials are meeting, amid signs the economy may need help.
Many factors can affect the economic balance, among them, after years on an even keel, the formerly robust U.S. economy has been taking some hits. Oil prices, for instance, have been going up, consumer prices have been going up, and signs of an economic slowdown have all worked to help unsettle the economy.
Some say the Fed needs to cut interest rates to get things back into balance. Will that happen today? Let's check in with Lisa Leiter, of CNN Financial News, for more about that -- Lisa.
LISA LEITER, CNN CORRESPONDENT: Hi, Lou.
Well, most economists do not expect the Fed to change interest rates today. They do expect the Fed to leave key short-term rates unchanged, and that rate now stands at 6 1/2 percent. The Fed has hiked rates six times since June of 1999 in an effort to fight off inflation, but they haven't done anything since May of this year, they have maintained the rate at 6 1/2 percent since then.
The Fed has also maintained, since October of 1999, a -- what's called a bias toward tightening rates, which means that inflation poses the greatest risk to the economy -- but today, most economists expect him to adopt what's called a neutral policy bias, which means that the risk to the economy are balanced, meaning that they are equally toward those that can generate inflationary pressures and those that could generate economic weakness.
As you mentioned, there are several things in the economy that have showed dramatic signs of slowdown. We've seen the manufacturing sector slow down sharply as auto makers have cut production and laid off workers. We've also seen retail sales fall off sharply, as well. Job growth has slowed. But the unemployment rate still remains relatively low.
We've also seen consumer confidence dip sharply at a time during the critical holiday season, and economists will be watching that very closely. And although they don't expect an interest rate cut today, one may come as soon as next month -- Lou. WATERS: And Lisa, who are these folks who expectations you're referring, that we're just going to slip into neutral and not cut interest rates today?
LEITER: These are the primary dealers, the economists that deal directly with the Fed, and they're the ones that were surveyed. According to a Reuters poll, all 26 believe the Fed will leave interest rates unchanged, and 23 out of 26 are betting on that neutral bias, although three of them do expect the Fed will go one step further by adopting a policy stance toward cutting interest rates -- which means they believe that recession is the greatest risk to the economy.
WATERS: All right, Lisa Leiter, on Wall Street, in New York.
The Fed's announcement, now, is expected in about an hour. We'll bring you the information as soon as it happens.
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