Markets to Gauge Fed’s Thought on Rates

It will be the thought of an interest rate easing, not the deed, that counts when Federal Reserve policymakers meet Tuesday for the last time this year to discuss the economy. What world financial markets are looking for is not cuts in borrowing costs--those are widely deemed to be a few weeks off even though the economy already has slowed drastically. What they want to hear, analysts say, is a formal expression of the Fed’s openness to such rate easing. Judging from a slew of recent comments by the Fed’s top brass, that is just what they will get. Fed Chairman Alan Greenspan and his colleagues have made it abundantly clear they now regard a sharp slowdown in growth as at least as big a risk to the economy as an inflationary overheating. That acknowledgment marks the first step on the Fed’s path toward cutting the key federal funds overnight bank-lending rate, which determines interest rates throughout the economy and far beyond, from its current level of 6.5%. Meanwhile, President-elect George W. Bush was expected to meet Greenspan today in Washington to make his case for a massive tax cut directly to the Fed chairman, who has been less than enthusiastic about Bush’s proposals.

Economic reports due this week:

* Tuesday, the Commerce Department will issue figures on the trade deficit for October.

* Wednesday, the Commerce Department will report on starts of new housing construction for November.

* Thursday, the Commerce Department will report revised figures for third-quarter gross domestic product, the total output of goods and services produced in the U.S.

* Thursday, the Federal Reserve releases the minutes of the Nov. 17 policymaking Open Market Committee meeting.

* Thursday, the Federal Reserve Bank of Philadelphia will report on factory orders for durable goods in its region for November.

* Friday, the Commerce Department will report on consumer spending and personal income for November.