The U.S. Conference Board Consumer Confidence Index came in very weak, as expected, and BMO Nesbitt Burns sees more interest rate cuts coming in response.

“We had our first glimpse of U.S. consumer confidence after the terrorist attacks on September 11th, and it wasn’t a pretty sight,” says BMO Nesbitt Burns. The consumer confidence index suffered its biggest monthly drop since the Gulf War build-up during October 1990, and it fell to its lowest absolute level since October 1995.

BMO says that the future readings will likely head even lower since this survey was only partly completed after September 11. “The consumer’s outlook over the next six months is quite dismal. Those expecting conditions to deteriorate jumped over 5 points to a seven-month high. Plans to buy cars have been postponed, although housing plans held up fairly well. All in, the reaction by households was large enough to expect a significant hit to consumer spending.”

BMO points out that U.S. Federal Reserve Board chairman Alan Greenspan said that a possible break in consumer confidence was what worried him the most. “More Fed cuts might not help rectify the situation quickly, but it’s the best option the Fed has available. Look for another 50 basis point reduction in the Fed funds rate in early October, with more easing in the wings.”