I think very highly of AG, and I consider him quite bright, and thus I cannot see any valid reason to lower rates, I have stated last month that the bright think for him to do will be to raise the rate by .25%. If he were to do that, Industry's Captains are not going to wait with their capex plans for lower rates, and they will rush to execute these fearing higher rates are coming down the pike. The problem in the economy is not that endemic, it is a crisis of confidence, and a rate hike will signal the fed see a brighter future, and by that action, will nudge those at the helms to indeed make the future bright. A rate hike will also relieve some of the current pressure on the dollar, will hit gold hard (and thus help salvage JPM's tight position), it could be the best thing to jump start the economy. If the rate were oppressive and preventing industry from investing due to bad returns relative to high rates, that is another thing, but whether the rates are 1.75% or 2% has nigh impact on actual business transactions and plans at this time. That is why I think that AG will resist lowering rates, and maybe even bump them before the end of the first quarter next year. The market will react with a huge rally to the first rate hike.
Zeev
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