By Evelina M. Tainer, Chief Economist, Econoday
12/14/01

The FOMC voted to cut the federal funds rate target 25 basis points on Tuesday (December 11), bringing the rate down to 1.75 percent. The accompanying statement suggested that Fed officials were skeptical about "tentative" signs of recovery in consumer demand. Indeed, economic indicators released later in the week such as retail sales, business inventories and industrial production continued to show sluggishness. The Fed left room for further rate cuts should they be needed in coming months. This was friendly news for the bond market, but equity investors would rather see signs of actual economic growth so that corporate profits will be in the black rather than the red.