Business-Insider

by Ryan Teeples

The US economy is rife with speculation and panic right now, and many economists are making predictions about the pending Fed rate cuts. As you have probably heard, a half-point cut is almost a sure bet (100% probability according to the futures market), while a .75 percent cut is considered a strong possibility by many.

But what about looking beyond this next announcement? As a long-term trader, I'm not as concerned about what will happen next week, as I am about what things will look like this summer.

As I was persuing the commentary out there this morning, I caught a little nugget of a comment from Burton Malkiel, the Princeton University economics professor who wrote "A Random Walk Down Wall Street.'' The article was an interesting one about China, but the snippet I refer to was about US rates.(http://www.bloomberg.com/apps/news?p...efer=exclusive )

He predicts the Fed will lower rates all the way to 3 percent this year, and expects lowering to continue throughout the first half of this year.

Take what you will from such a "prediction," but the fact is, as traders, we should consider what may happen if rates did take such a course. Whether Malkiel is right or wrong, it seems likely that things are going to get worse for the dollar for quite a while before they get any better.

Here's a great article to help you understand the factors that go into rate adjustments, and an explanation of the difference between the Discount Rate and the Fed Fund Rate:

http://www.pfxglobal.com/index.php?o...480&Itemid=116

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