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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (3610)	11/27/2001 2:26:44 PM
From: GraceZ	Read Replies (2) \| Respond to of 24758

Roach Message 16706131

To: ahhaha who wrote (3610)	11/27/2001 3:41:04 PM
From: ahhaha	Respond to of 24758

Tuesday November 27, 3:00 pm Eastern Time Fed's Meyer-"Misguided" to keep policy powder dry CLAYTON, Mo. Nov 27 (Reuters) - Federal Reserve Governor Laurence Meyer said on Tuesday he thought it would be a mistake for the U.S. central bank to move slowly on lowering interest rates, even though they are already quite low. The key fed funds rate stands at 2 percent and has been taken down by one and one-half percentage points since the Sept. 11 hijack attacks on New York and Washington. ``Does this mean that the Fed should 'keep its powder dry,' as some have argued, holding back on further easing in case the downturn turns out to be more serious or in case there are additional adverse shocks?'' Meyer said in remarks to a meeting of business economists. ``I believe such a strategy would be misguided -- indeed the reverse of what would be appropriate,'' he added. The remarks were notable as Meyer is widely seen as an anti-inflation ``hawk'' at the central bank. Meyer said he spoke for himself, not for the rate-setting Federal Open Market Committee of which he is a member. Negative Rates Might be Needed The question of how aggressive the Fed should be has loomed larger since the attacks, particularly in light of the experience in Japan, where interest rates of close to zero have yet to break a decade-long economic slump. Meyer said the problem with waiting to dole out more rate medicine is that it may hurt the ability to drive inflation-adjusted interest rates into negative territory, ``as might be necessary to support a timely recovery.'' ``The implication of starting with an unusually low interest rate is therefore not to go slowly but to more aggressively respond to any adverse shock,'' he said. Fed Policy Still Effective On Monday, the academic panel that officially dates U.S. recessions said the economy had started shrinking in March, even though the Fed had started easing rates in early January. The absence of pickup in growth has led some analysts to wonder if the Fed's rate-cutting is as effective in boosting the economy as it has been in the past, a contention Meyer appeared to reject. Meyer said there had been ``painfully little pass-through'' of the Fed easings from the financial system to the rest of the economy. ``The absence of pass-through does not reflect a change in the fundamental effectiveness of monetary policy so much as the offsetting effect of other financial shocks that were occurring at the same time the Fed was easing,'' he said. Looking ahead, Meyer said the U.S. economy should strengthen over the next year, but also warned that risks remain tilted toward the downside. ``Once the economy shows signs of moving to a rate of growth above trend, the Fed will have to reassess the appropriate degree of stimulus and, at some point, begin the return to a more neutral policy,'' he said. Don't the bolded statements contradict each other?