Fed May Take Breather After Seven Rate Cuts, Emergency Loans

Federal Modesty functionaries are betting
that seven and exigency loans to Banks may be
just about adequate to draw the economic system through the biggest
financial crisis since the Great Depression.

The Fed's Open Market Committee lowered its benchmark rate
by a one-fourth point to 2 percentage yesterday, extending the most
aggressive moderation in two decades. At the same time, the Fed
backed away from former linguistic communication signaling a penchant for
further cuts and described decreases to day of the month as ''substantial.''

Chairman is navigating between a faltering
economic enlargement and near-record oil and trade goods terms that
threaten to stoke inflation. The cardinal depository financial institution didn't govern out
further reductions, and it may take further actions aimed at
easing financial-market turmoil, such as as expanding the size of
cash-loan auction bridges for commercial banks.

''There's no urgency,'' said , main economist
at Nomura Securities International in New York. ''It's pretty
clear that they believe they've done a lot, and it's going to
take some clip for the full personal effects of their moderation to work their
way through and into the economy.''

Hours before the Federal decision, the Commerce Department
reported that gross domestic merchandise increased at an yearly pace
of 0.6 percentage last quarter. Only an addition in
prevented the economic system from contracting.

In March, the Federal began loaning to Wall Street securities
firms at the rate, now at 2.25 percent. It rescued Bear
Stearns Cos. from bankruptcy in the first extension of recognition to
non-banks since the 1930s. The Federal also began auctioning up to
$200 billion in loans of Treasury securities.

Paulson Optimistic

Treasury Secretary , in an interview with
Bloomberg Television yesterday, said the recognition crisis probably
is more than than one-half over.

''They have got been quite successful'' in moderation the financial
crisis, said , a former president of the Capital Of Georgia Fed
who is now president of the finance section at Center Tennessee
State University. ''There is no ground they couldn't go on to
provide liquidness without lowering the Federal finances rate,'' he
added.

The FOMC adjacent rans into June 24-25 in Washington. Traders expect
the Federal to go forth the nightlong loaning charge per unit between Banks at 2
percent for the remainder of the year, though they began to terms in
the opportunity of a quarter-point cut, placing 22 percentage likelihood on
that result in June. The same hereafters bespeak bargainers see no
chance the charge per unit will be below 2 percentage at year-end.

Cumulative Action

Yesterday's determination conveys the Fed's accumulative reductions
in the federal finances charge per unit to 3.25 per centum points in seven cuts
since September. In 2001, the cardinal depository financial institution lowered the charge per unit 11
times for a sum of 4.75 points.

Bernanke's predecessor, , have come up under
criticism from some economic experts this twelvemonth for inflating the
housing bubble by leaving rates too low for too long. Such
concern may be keeping Bernanke, 54, a former Princeton
University economic science professor, from pushing them down further.

''The flak catcher the Greenspan Federal got for going to 1 percentage and
staying there is going to maintain Bernanke from going below 2,''
former Dallas Federal president said in an interview
with Bloomberg Television.

At this week's two-day meeting, Federal governors and district-
bank presidents provided fresh quarterly economical forecasts,
which will be disclosed in proceedings to be released May 21.

''Economic activity stays weak,'' the FOMC statement said. ''Tight recognition statuses and the deepening contraction
are likely to weigh on economical growing over the adjacent few
quarters.''

Housing Recession

The economic system have been the hobbled by the worst housing
recession in a one-fourth century, and it demoes small mark of
abating. Investing in undertakings drop at
an yearly charge per unit of 27 percent, the most since 1981.

At the same time, Federal functionaries reiterated their concern
about rising prices, saying that ''uncertainty about the
inflation mentality stays high.'' They repeated linguistic communication from the
March 18 statement that policy shapers anticipate rising prices to slow,
''reflecting A proposed leveling-out of energy and other
commodity prices.''

Crude oil hereafters drop this hebdomad after touching a record
$119.93 a gun barrel on April 28. Prices are up 57 percentage since Aug.
7, the last clip the FOMC left involvement rates unchanged at a
meeting.

Two presidents dissented for the second
straight gathering, while just four of 12 Federal Banks asked for a
cut in the price reduction rate, which covers direct loans to commercial
banks and usually travels in bicycle-built-for-two with the federal finances rate.

'Considerable Disagreement'

''There's considerable dissension on the committee,'' said
, a former Federal research director who is now senior
economist with Macroeconomic Advisers LLC in Washington. ''The
statement clearly imparts an outlook by this commission that
they will hesitate at the adjacent meeting,'' he added.

Dallas Federal President dissented yesterday for
the 3rd consecutive meeting, while City Of Brotherly Love Federal President
voted against the FOMC charge per unit cut for a second
time. , president of the San Francisco Fed, said last
month that the Federal ''will have got to be careful not to leave
monetary adjustment in topographic point longer than it is needed.''

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