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Pros Say: Lower Rates Will Unfreeze Liquidity

CNBC.com
Tuesday, 16 Dec 2008 | 4:29 AM ET

Trading was cautious Tuesday ahead of a Federal Reserve meeting that is expected to cut interest rates again as well as hint at future monetary policies to stabilize the economy.

CNBC's experts anticipate the Fed will cut rates to 0.5 percent or lower, but their focus has turned to alternative measures the central bank can take to give the economy a boost.

Unfreezing Liquidity

Liquidity will start flowing out as rates go to extremely low levels, says Peter Redward, head of research for Emerging Markets Asia at Barclays Capital.

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US Mortgage Rates Need to Fall

If the Fed and Treasury are able to drive mortgage rates down for an extended period of time, it will have an incredible effect on its economy, says Mike O'Rourke, chief market strategist at BTIG.

Fed Rate Cuts Don't Matter Anymore

It does not matter if the Fed cuts interest rates by 50 basis points, says Diane Swonk, chief economist at Mesirow Financial, ahead of its rate decision Tuesday. She tells CNBC what matters is whether the Fed will sell its own debt.

Lowering Rates Will Not Do Much

While the Fed is expected to slash rates close to zero, Clifford Bennett, chief economist Kinetic Securities tells CNBC why he believes they should, in fact, stand pat.

No Major Market Reaction

The Fed's widely expected 50 bps rate cut is unlikely to cause a major market reaction, says Callum Henderson, head of FX strategy at Standard Chartered Bank.

Europe Needs Further Coordinated Effort

Further coordinated policy response is needed in Europe to help the region recover, believes, Harmut Mayer, region head at Oxford Analytica.

Contact Europe: Economy

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