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Fed Meeting Today to Decide on Interest Rate Cut

Aired January 30, 2001 - 1:02 p.m. ET

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

NATALIE ALLEN, CNN ANCHOR: Today's report comes as Federal Reserve officials meet in Washington. The Federal Open Market Committee is trying to decide whether the economy needs another interest rate reduction.

Peter Viles of CNN Financial News is keeping watch.

He joins us now -- Peter.

PETER VILES, CNN CORRESPONDENT: Natalie, that report you just mentioned on consumer confidence certainly a factor for the Federal Reserve to take into consideration today, the lowest reading, as you said, on consumer confidence in four years.

This meeting now been going on for about four hours. Alan Greenspan came to work, as he almost always does, just about 8:00 this morning without any fanfare. But this is a special day and a special meeting, a two-day meeting: We'll hear the results of this meeting tomorrow, sometime around 2:15, if tradition holds.

And the Federal Reserve considering whether to cut interest rates again. Remember, the Fed cut rates the first week of January in a surprise -- no meeting then, they cut them after a conference call on the telephone. They are expected to cut rates again tomorrow because all month long we've been hearing negative news about the economy -- the theory behind cutting rates: It makes the cost of money cheaper, it makes consumers go out and spend on big-ticket items, and it makes businesses more likely to spend on expansions, new plants, new stores that mean new jobs. So the expectation after this consumer confidence number is for another interest rate cut, probably a half a percentage point -- Natalie.

ALLEN: Love the slow-motion picture of Greenspan coming into work there, Peter.

Question for you: Will the Feds have any more economic reports to pour over before they make a decision?

VILES: They sure do. And Greenspan is known to love to dig through these numbers, but tomorrow morning the government will issue a major report on how much the economy grew in the fourth quarter. Most economists believe the economy was still growing, maybe at about a two percent annual rate in fourth quarter. We'll know for sure tomorrow morning at 8:30, and the Fed will know for sure. Also a report tomorrow on new home sales, which have been holding up pretty well. The real estate sector of the economy has been holding in there, consumers continuing to refinance, continuing to buy new homes. January was a great month to refinance homes, as interest rates fell.

So we'll know tomorrow if the real estate portion of the economy is still holding up, and the Federal Reserve will know as well when it makes its decision on interest rates.

ALLEN: Peter Viles, thank you, Peter, in Washington.

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