By Maxine Shapiro, KERA 90.1 business commentator
Dallas, TX – How interesting it will be to read what historians and economists will say 20 years from now about Alan Greenspan, the amazing interest rate cutter. Of course, if the desired results are not visible within the next few months, we can begin writing those pages of history now. I'm Maxine Shapiro with KERA Marketplace Midday.
Twelve interest rate cuts since 2001. The two and half years have flown by. Somehow I can remember what I was doing that January, but I don't remember the federal funds rate standing at 6.5%. Today, they're at 1.25% and will most likely be lowered tomorrow. Could this be "lucky thirteen?" The advantage this cut has over the others is the time between them. Every other time the interest rates have been slashed, we took it as a sign of things were worse than thought. It had a reverse effect.
Last November, predictions were flying about the twelfth cut. It was a quarter drop and speculation was - that was it. There was even conjecture on when the Fed might moves rates up. But then came the talk of war, the war itself and the shock and awe of what war can do to the economy - another setback on the road to recovery. But over the last three months, the stock market has seen a 20% jump. Manufacturing, hit the hardest in the recession, is attempting to get back on its knees. Why, even the prices of goods and services have seen a slight rise, potentially shaking off the fear of deflation. However, we've been here before only to turn right back around again. Greenspan wants to make sure this time the rate cut does its job - support the recovery.
But what about the labor market? The New York Times describes it as "the worst hiring slump in over 60 years." CNN/Money has this telltale graph showing how the stock indices have gone up and down while interest rates were dropping. Unemployment, on the other hand, is a straight line up diverging from interest rates.
Greenspan's goal is to bring the latter lines closer together. I say, whatever it takes. For KERA Marketplace Midday, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m.
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