Although some of last week’s economic data has traders questioning whether the U.S. Federal Reserve Board is still on track to cut interest rates by 50 basis points at tomorrow’s meeting, BMO Nesbitt Burns is still calling for 50 bps cut

BMO Nesbitt says, “The recession in U.S. factories is not losing momentum, nor are there many hopeful signs that a turnaround is imminent.” It continues to call for a Fed rate cut of 50 bps tomorrow, “with a view that risks remain primarily to the downside”.

BMO Nesbitt notes that industrial production fell 0.3% in April, reinforcing the view that the U.S. factory sector remains under heavy pressure. Also, capacity utilization was weaker than expected at 78.5%, with March revised down to 78.9% from 79.4%.

“The most interesting parts of the report were the large negative revisions. For March, total production, manufacturing, and durables were revised down by 0.5%, while computers, non-durables and utilities were cut by 0.7%. With the revisions, production has now declined for seven straight months. Notably, computers & office equipment were revised to a loss of 0.9% in February from a gain of 0.7%, indicating that the Fed is continuing to have problems dealing with high-tech production data.”