Wall Street Is Pressing Fed For More Rate Cuts
It's been less than a week since the Federal Reserve hinted it was done lowering interest rates. Yet Wall Street is already clamoring for yet another cut.
The reason: fresh concerns about a growing credit crunch pushing the U.S. economy into a recession.
In the past two days alone, investors have heard new warnings about the credit crisis from such big names as George Soros, Bill Gross and Alan Greenspan.
On top of that, huge losses at financial giants Citigroup and Merrill Lynch have fueled worries that, as Gross told CNBC on Monday, the credit crunch is likely to get worse before it gets better.
"I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing," Soros said in a speech on Monday. The billionaire investor added that the U.S. economy is "on the verge of a very serious economic correction" after decades of overspending.
All this comes as the Fed tries to discourage investors from counting on any more rate cuts. In its statement last week, the central bank said that it was just as worried about inflation as it was about an economic slowdown, meaning it won't cut rates just to bail out financial markets.
Bernanke Faces Congress
But Bernanke, who testifies before the congressional Joint Economic Committee Thursday, will no doubt face tough questions about how the central bank is addressing renewed credit concerns that have wiped out billions of dollars in bank profits and cost two high-profile Wall Street CEOs their jobs.
Many investors are discounting data suggesting the U.S. economy is safely navigating a housing recession, and pleading for further interest-rate cuts to stave off what they fear will be an inevitable hit to the economy from tighter credit.
"They've (the Fed) always been data dependent, and the data will suggest that they will have to cut rates again," Quincy Krosby, chief investment strategist at The Hartford, told CNBC.com. "We've been on the side that there will be more rates coming. I think the bond market right now is suggesting that as well."