FOMC Hints Of U.S. Interest-Rate Cut -- But When?

Jan. 13, 2005
By John S. McClenahen When Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee (FOMC) met Aug. 13 in Washington, D.C., to discuss monetary policy the outside air temperature was near 100 degrees Fahrenheit. The U.S. economy, ...
ByJohn S. McClenahen When Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee (FOMC) met Aug. 13 in Washington, D.C., to discuss monetary policy the outside air temperature was near 100 degrees Fahrenheit. The U.S. economy, however, is not nearly that hot, a condition the FOMC acknowledged by hinting that another reduction in the influential federal funds rate, which remains at 1.75%, may be in the offing. "The risks are weighted mainly toward conditions that may generate economic weakness," says the FOMC. "The softening in the growth of aggregate demand that emerged this spring has been prolonged in large measure by financial markets and heightened uncertainty relates to problems in corporate reporting and governance." Although manufacturing has continued to post some encouraging numbers lately -- including remarkable growth in productivity -- a second-half 2002 surge in GDP doesn't seem likely. Indeed, in contrast to the talk of just a month ago about when the FOMC would raise short-term U.S. interest rates, there's more talk now about when the FOMC will cut them -- and by how much. The next scheduled FOMC meeting is Sept. 24.

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