Alan Greenspan is expected to cut rates in two weeks, but one economist says after that action we may see nothing else from the Fed until December. And as Fox News Channel's Neil Cavuto found out from Diane Swonk, Chief Economist at Bank One in Chicago, the Fed's next move could be a rate hike.
Q: How much more easing beforehand?
Swonk: We are going to see a 50-basis-point move March 20 by the Fed. I think it's important to understand this is a Fed that is not managing the scenario as they usually do. They think the economy is not going into a recession.
Q: Do you buy that?
Swonk: I more than buy it, I sell it. I think one of the interesting things to look at is that the National Association of Realtors have revised their numbers. Instead of being down, they are up. You have got to have confidence. Vehicle sales have been soaring.
Q: But with all of these surveys people are bumming out, they are depressed.
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Swonk: But action speaks louder than words. The killer here is that expectations have deteriorated quite dramatically. Most of the deterioration because people are reading negative headlines about the economy.
Q: I know you admire Alan Greenspan and all of that. But it seems to me that if Greenspan sees improvement without any inflation, I think he will have a knee jerk reaction, hike rates and ask questions later.
Swonk: What he has laid out comes just in time. He said: 'Listen, there is a 20 percent chance of recession out there and we are going to hedge against it. Financial markets took that first easing up on Jan. 3 the wrong way. They thought it was panic but it was really an insurance policy.