The bond market has largely priced in an 50 basis point cut in the Fed funds rate for Tuesday's FOMC meeting. Given the volatility of U.S. equity markets, coupled with a spate of economic data releases and the specter of a looming financial crisis in Japan, BondWeek asked veteran economists what their thoughts were for a greater than 50 basis point cut.
*Brian Horrigan, chief economist at Loomis Sayles: "I see a shot at this happening, but nothing so clear as 50 basis points. Still, they are looking at a major loss of confidence out there, so you can't discount them making precedent."
*Jim Paulsen, chief economist and investment officer at Wells Capital Management: "Seventy-five basis points is a lot for them at once. The wild card here is the Japanese and their banks, because that speaks to a systemic problem. They'll stick to gradual action."
*Brian Wesbury, chief economist at Griffin, Kubik, Stephens & Thomas: "If they don't do at least 75 basis points by the end of Tuesday, the equity markets will be disappointed. There is an outside shot they'll at least discuss 100. At any rate, they need to get Fed funds down in the 4-4.25% range."
*Brian Keyser, chief economist at Citigroup Asset Management: "They're not likely to do more than 50 [basis points] in one shot, unless the data they have points to sharply declining confidence issues."
*Gary Thayer, chief economist, A.G. Edwards: "Break-even odds between 50 and 75, based on an even combination of weakening data, and declining consumer confidence."
*Jade Zelnick, senior economist, Greenwich Capital Markets: "I don't see them doing 75 basis points at once. If it were based exclusively on data, they would possibly cut only 25 basis points. But given the free-fall in equity valuations, the markets are pricing in quite a bit more."
