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CNN Today

Rosensweig: Fed Will Not Cut Rates

Aired December 19, 2000 - 1:04 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOIE CHEN, CNN ANCHOR: Just where is the economy headed? Jeffrey Rosensweig is an associate dean at Emory University's Goizueta Business School, here in Atlanta, and he's here to tell us that.

But first give us your prediction on what the Fed's going to do.

JEFF ROSENSWEIG, GOIZUETA BUSINESS SCHOOL: I think the Fed won't cut, and if you notice the stock market is up today -- I think people are beginning to think maybe they'll give a little bit of boost, but it'll be disappointing when they don't cut, but I don't think they'll do it.

CHEN: All right, but things have been pretty rocky overall in the economy. Is this a sign of bad things to come?

ROSENSWEIG: Hey, I would like to see the cut, I'm hoping myself because things are really bad. It's all right for professors to say I've got my job, but people are going to be losing their jobs. You know, even yesterday, we saw Gillette, Aetna, Prudential -- great companies are laying off people, and what happens after Christmas? It could get ugly.

CHEN: And you're predicting that it will get ugly?

ROSENSWEIG: Not very ugly, but I think we're going to see more layoffs, we're going to see the unemployment rate rise, and therefore we're going to see the Fed eventually do some pretty severe interest rate cutting. I wish they would start today, I just don't think they will. I thought about a 25 percent probability on them doing it today, but late January, they're going to really have to come in strong.

CHEN: When you say things are -- they're going to be more cuts, are you talking about in retail, or are you talking about manufacturing -- where do you see the most serious problems?

ROSENSWEIG: Both -- if you have job in dot-com sector, especially what's called an e-tailer, I mean I hope your resume is already on the street...

CHEN: Or on the web.

ROSENSWEIG: On the Web, exactly -- and in fact, those are the only ones still alive, probably, will be Monsters.com or HotJobs.com -- the others are going under. Because, at least, they're trying to get these people recycled into jobs.

So I do feel manufacturing is hurting, I do feel retail is hurting. It's going to be bad, and that's why I think the market is up today: They're beginning to think, well, maybe Greenspan will act faster. I just don't think he will, because he's a Republican; he has to maintain independence, of course, and does a good job of that, but he's a Republican, and to cut interest rates the day after meeting a Republican president-elect would affront his idea of the independence of the Fed.

On the other hand, he might have to move in early January, not wait until a meeting because by late January, when the next Fed meeting is, I think we're going to see significant layoffs by then, and we're going feel that pain of people.

But you are feeling it in manufacturing already. Specifically, you ask about manufacturing, the dollar is too strong. Interest rates cuts might bring the dollar down, which would help us export. Right now, manufacturing is really hurting; we're just too expensive, compared to Asian, Latin American, and sometimes even European products right now.

CHEN: All right, Jeffrey Rosensweig, we're going to ask you to hold on. We're going to see you in about 1 1/2 hours, after we hear from the Fed, and we're going to see how your predictions went.

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