Fed cuts rate by quarter point
The Federal Reserve cut interest rates by a quarter-percentage point on Wednesday to buffer the economy from a housing downturn, but suggested further rate reductions were far from a sure bet.
The decision by the central bank's Federal Open Market Committee to lower the overnight federal funds rate to 4.5 percent -- a move that followed a more aggressive half-point cut last month -- was widely expected. However, with an eye on surging energy prices and other inflationary threats, it strongly discouraged expectations of further cuts.
That statement, coupled with a dissent from Kansas City Federal Reserve Bank President Thomas Hoenig, who favored holding rates steady, threw cold water on expectations that additional reductions in borrowing costs are in store.
"The Fed has no inclination to cut rates further unless the economic data suggest otherwise. Hence, barring another financial shock, the economic data will have to weaken for Fed easing to come back on the table," said Joseph LaVorgna, chief U.S. economist for Deutsche Bank.

Oil closes at new high of $94.53 on inventory drop and weak dollars
Crude-oil futures closed at a new high of $94.53 a barrel on Wednesday after U.S. crude inventories dropped surprisingly in the latest week to the lowest level in two years and the dollar lost ground on the Federal Reserve's rate cut. The economy grew at a surprisingly brisk clip in the third quarter, the government said on Wednesday in one of a series of reports that implied a resilient expansion despite a battered housing sector.

Strong consumer spending and brisk exports helped push third-quarter gross domestic product ahead at the fastest rate since the beginning of 2006, while there also were signs private employers were still building up payrolls.

GDP measures total production within U.S. borders. It grew at a 3.9 percent annual rate in the July-September quarter, up from 3.8 percent in the second quarter. It was the strongest growth since 4.8 percent in the first quarter of 2006.

Auto sales seen dipping in October

Auto sales are expected to have dipped slightly in October, as stepped-up incentive spending by automakers could not totally offset the drag from continued turmoil in the housing market, analysts said.
Vehicle sales, widely watched as a leading indicator of U.S. consumer spending, began slowing in the second quarter and are expected to remain under pressure for the rest of 2007.
"With oil prices above $90, choppy stock markets, and renewed economic concerns, the selling environment remains poor for new light vehicle sales," Goldman Sachs analyst Robert Barry said in a note for clients.

Buffett saw red flags at Freddie before subprime crisis

As a prosecution witness, Warren Buffett testified he detected signs of trouble at mortgage finance giant Freddie Mac years before a $5 billion accounting lapse was revealed.

The billionaire investor testified Tuesday for the government in its legal proceeding against Leland Brendsel, the former Freddie Mac chief executive who was ousted in 2003 when the firm's manipulated earnings were discovered. Buffett's testimony by video link to a courtroom in Washington was intended to explain why his Berkshire Hathaway Inc (Charts). holding company, which had been one of Freddie Mac's largest shareholders, began selling off shares in the late 1990s.

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This entry was posted by David Choi, on Wednesday, October 31, 2007. You can leave your response.