Fed's rate cut is no quick cure (Detroit Free Press)
Thursday, December 13, 2001
Right on schedule, the Federal Reserve played the song we all know so well and cut interest rates a quarter point. The rate cut -- the 11th hit this year -- will bring the short-term federal funds rate down to 1.75 percent. A year ago, the federal funds rate, the rate banks charge one another for overnight loans, was 6.5 percent.
Make no mistake, it is fantastic that the Fed has moved so aggressively for so long. Rates for car loans, mortgages and even credit cards have fallen this year. Things would have been looking a lot worse if the Fed had done nothing.
Yet most economists say we're still in a recession that began in March. That's true despite two rate cuts in January and others in March, April, May, June, August, September, October and November.
It is now more clear than ever that Fed Chairman Alan Greenspan cannot turn on the music and on cue get the economy dancing. Another rate cut and the Fed risks mimicking the latest Mick Jagger extravaganza: plenty of noise for die-hard fans, but starting to sound like the same old song.
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