Three Conditions Necessary Before a Rate Cut Comes, Analyst Says

Wednesday, 4 Apr 2007 | 11:20 AM ET
Coca Cola
Coca Cola

Joseph Keating, chief investment officer at First American Asset Management, told CNBC’s “Squawk on the Street” that the Federal Reserve is done raising rates -- and he named the three conditions that will have to be in place before it makes a cut.

“One, you’ve got to get the unemployment rate rising,” Keating said. “The Fed has never lowered rates without the unemployment rate going up –- something about 5%. Second, you’ve got to get the inflation rate consistently inside 2%. Third, we’ve got to have the overall growth rate in the economy remain in the 1.5%-to-2.5% range. When those three conditions are in place, then the Fed will cut rates.”

Market Overview
Housing holds the key for 2007 and 2008, and dividend plays will provide the best long-term opportunity for investors, according to Joseph Keating, First American Asset Mgmt. CIO. He shares his outlook with CNBCâ??s Mark Haines.

He added, “I don’t know that it will happen anytime soon.”

He said investors should take a look at “solid mainstream companies” with growing cash flow, solid earnings and dividends such as Raytheon, Coca-Cola, PPG Industries, Consolidated Edison and Kimberly-Clark.

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