BusinessWeek Online
DAILY BRIEFING -- Please, Mr. Greenspan, Surprise Us Again
biz.yahoo.com
Friday August 17, 12:41 pm Eastern Time
By Chris Farrell
It's time to take out an insurance policy on the economy, Alan Greenspan. When the Federal Reserve Board holds its next policymaking meeting on Aug. 20th, the central bank should boldly slash its benchmark interest rate by half a percentage point rather than the widely expected quarter-point. Even if the worst of the slowdown is behind us -- and it is still a slowdown, not a recession -- the economy is too fragile for caution.
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Bold action is needed. The Fed can slash short-term rates without worrying about stoking inflation. Producer prices are rising at a mere 1.5% year-over-year rate, and consumer prices are only up 2.7% over the same time period. Meanwhile, import prices have declined by 2.3% from a year ago. Corporate pricing power is evaporating in a weak economy. ``I think there is a pretty clear message from the stock, bond, and commodity markets in combination that the Fed needs to ease more, probably by more than a quarter-point,'' says James W. Paulson, chief investment officer at Wells Capital Management.
America's economic expansion is in its 11th year. Right now, we're going through a nerve-racking period. My hunch is that one more positive jolt from the Fed may be all it takes to keep the economy growing. |
