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Joined: 07 Feb 2005
Posts: 23
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 Posted: Wed Jan 23, 2008 4:01 am Post subject: US rate cut too late to avoid recession, say analysts |
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| Quote: | The US Federal Reserve's emergency rate cut today will deliver a jolt of stimulus to an ailing US economy but may be too little and too late to avert a painful recession, analysts say.
Economists say the surprise cut of three-fourths of a percentage point, the largest since the central bank began using the federal funds rate as a policy tool in the 1990s, may help kick-start flagging growth.
Yet some say the move will bring little immediate relief and other critics say Fed chairman Ben Bernanke may have buckled to market pressure, setting a bad precedent.
Keith Hembre, chief economist for First American Funds, said the rate cut in the funds rate to 3.5% "is a welcome move" but not enough to avert a downturn.
"Our forecast is that we're likely to have a recession and the Fed needs to bring its real rate (after adjusting for inflation) to zero," Hembre said, suggesting a federal funds rate of around 2.5%.
"Monetary policy is going to affect the economy with a substantial lag so this will not do anything to head off economic trouble in 2008 but it should set the stage for a pretty good environment in 2009," Hembre added.
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Read more here:
http://business.theage.com.au/us-rate-cut-too-late-to-avoid-recession-say-analysts/20080123-1nn9.html |
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