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Article: Best shot or long shot? Having cut the federal funds rate steadily since the end of 2000 in its effort to boost a flagging US economy, is the Federal Reserve getting short of ammunition? Ted Stone reviews the remaining options available to the Fed. (Business US Economy).
- Article from:
- Financial Management (UK)
- Article date:
- March 1, 2003
- Author:
CopyrightCOPYRIGHT 2003 Chartered Institute of Management Accountants (CIMA). This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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When the US Federal Reserve reduced the federal funds rate to 1.25 per cent in November 2002, many people thought that America's economy was ready to rebound. But, having seen disappointing levels of consumer spending at the end of the year, some commentators fear the Fed is running out of silver bullets--those delightful reductions in short-term rates that have always pulled the economy out of past doldrums. Is it possible that the US could be heading into a Japanese-style slump?
Alan Greenspan, the Fed's chairman, seems unconcerned. He recently reaffirmed that the central bank had more tools in its kit than the ability to set the federal funds rate. He fondly ...