mlsoft, I think you hit the nail on the head with this one. You are right, at this point the equity markets are the easiest (tho not the most effective) segment to 'inflate'. The fed will vehemently deny that this is so, but the reality is, the stock market indexes are included in the Leading Economic Indicators. So, to the extent that they can pump up the equity markets, they will be able to push the Economic Indicators ahead, albeit by a much smaller fraction. But this makes some sense in two ways: the much discussed 'wealth effect' of the equity market riches on the society, and the positive effect that the discount rate reductions have on the businesses. At this point in time corporations are laden with debt, and any interest rate cut has an immediate and direct positive effect on their bottom line by reducing ther liabilities, many of them even avoid bankruptcy just because of that small difference. They do renegotiate and rewrite their loans.. Also of course, for those businesses that can afford it, investing in capital equipment becomes that much more inviting. Which of course adds to the economic activity and that's a good thing.
I have nodoubt in my mind that come Q2 03, Al will be raising his rates starting with a 1/2 percent initially.
AI
