Tuesday, December 11, 2007

Tighten Up!

I have mentioned several times here that I am becoming increasingly pessimistic about the near term U.S. economy. There is no good news coming down the pipe, employment, housing, fuel, food all are seeing bad news. I think any prudent person should be preparing for some serious hard times in the next 6 or 12 months. I am not the only one whistling past the graveyard.

Fifty of the 52 economists surveyed expect the Federal Open Market Committee to trim its target today for the federal-funds rate, the rate charged on overnight loans between banks. Only two see the Fed holding the rate steady at 4.5%.

Some 61% say a quarter-percentage-point cut would be right; 27% say the Fed should cut rates by a half-point. Only 12% say the Fed should stand pat.

The economists, on average, now put the chances of a recession at 38%, the highest in more than three years, and up from 33.5% in November. They also reduced forecasts for U.S. economic growth across the board. They expect the nation's gross domestic product to grow at an annualized rate of 0.9% this quarter, down from 1.6% in the previous survey, with six economists expecting either a negative or a flat reading. Three economists project an economic contraction in the first quarter, with the average growth forecast at 1.5%, down from 1.9% in November.

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