|Editions | myCNN | Video | Audio | Headline News Brief | Feedback||
Fed Holds Interest Rates at 6.5 PercentAired December 19, 2000 - 2:16 p.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU WATERS, CNN ANCHOR: We've just received word that the Federal Reserve Board has its made decision: No change in interest rates. We are still in the idle position here.
Let's check in with Rhonda Schaffler at the New York Stock Exchange, where the markets have been up most of the day.
Rhonda, no change.
RHONDA SCHAFFLER, CNN CORRESPONDENT: That's right, Lou. No change, Lou. Rates being held steady and the Federal Reserve is just putting out its statement right now saying that inflation risk diminished by the moderate economic pace. The Fed also citing energy costs and eroding confidence for the slowing economy.
But rates are left unchanged. And Wall Street was expecting this sort of commentary from the Fed, basically what it does is move the Fed off of the inflation stance that it has over the past 19 months. During that time the Fed went on a campaign of raising interest rates six times over that course. The last interest rate hike coming in May.
As far as what the market is doing now, selling off pretty dramatically. The Dow is up, but only by 53 points, and we're seeing traders continue to sell into the rally as I speak.
Right ahead of the announcement, there was a pretty strong rally here on some optimism that there would be this change in position, and also some hope that the Fed might surprise the markets and actually cut rates. That did not happen. The Dow's financial components have now turned lower. They are, of course, interest rate sensitive. The entire group higher before the Fed announcement was made, and that included at the moment Citigroup, which had been up $1.
The Nasdaq composite is also coming off its best levels. The Nasdaq is up 17 points right now. It's been down for the past five sessions. Now analysts say there is a couple of reasons why the Fed might now have cut rates today. The Fed, which is vehemently independent, perhaps, wanted to avoid any perception it was being political. Remember, yesterday, President-elect Bush and Alan Greenspan met for breakfast.
Also, the Fed is known as an incremental mover. It takes little steps when it comes to rate hikes. So swinging from an inflation bias all the way to an easing bias, and then cutting rates would be somewhat out of character for the Fed.
And perhaps, more importantly, the Fed wants to have more evidence of how much the economy is slowing, and at its meeting next month, the Fed will have data about, for instance, how the holiday shopping season went and the latest job figures.
The Fed meets again in January. Back now to Lou in Atlanta.
WATERS: All right, Rhonda Schaffler on Wall Street, where the markets are up. Not as much as they were earlier today. But that's where it stands at 6 1/2 percent, Federal interest rates remain the same; off the inflation stance.
Earlier, from academia, a prediction that the rates would remain unchanged.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
|Back to the top||
© 2001 Cable News Network. All Rights Reserved.|
Terms under which this service is provided to you.
Read our privacy guidelines.