i Develop Stocks Advisory

Fed may continue slashing rates as payrolls decline The Federal Reserve may keep lowering interest rates and postpone the “rapid reversal” of reductions that officials discussed in January, as the housing rout erodes hiring and spending. The employment report, showing the economy lost 85,000 jobs in the first two months of 2008, altered economists’ and traders’ expectations for how much the Fed will cut rates and how long it will hold them down. Increasing signs the US is in a recession, along with a further deterioration in credit markets, spurred traders to bet the Fed will cut its benchmark rate as low as 1.75% by June. The weakening housing and labor markets are also putting pressure on the Bush administration to do more to stem the surge in foreclosures and ease a shortage of cash in money markets. “The economy faces considerable headwinds and rates will have to stay low,” said Brian Sack, a senior economist at Macroeconomic Advisers in Washington. “Weakness in payroll growth, falling confidence, declining wealth, and tighter credit conditions all add up to a weak outlook.”