[OPE] Recession could be best medicine

From: Alejandro Valle Baeza (valle@servidor.unam.mx)
Date: Sat Mar 15 2008 - 16:34:11 EDT

Recession could be best medicine
Some economists, including one Fed member, say more rate cuts could be bad for the
economy. But most expect Bernanke & Co. to slash rates again Tuesday.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: March 15, 2008: 12:59 PM EDT
NEW YORK (CNNMoney.com) -- Two widely accepted beliefs about the upcoming Federal Reserve
meeting Tuesday are that the central bank is worried about the country falling into a recession and
that it will again slash interest rates sharply.
But should the Fed stop worrying and love a recession?
Several economists, including one member of the Fed's policy-making committee, have argued that
more rate cuts are the wrong solution to spur economic growth. Some even believe a recession
might be the best answer for the economy in the long term. That's still a minority view though.
Federal funds futures on the Chicago Board of Trade show investors betting that there is a 100%
chance of at least a three-quarter percentage point cut at the March 18 meeting, and a 52% chance
of a full percentage point cut.
Even most critics of the Fed's rate cuts concede some additional cuts are certain Tuesday,
especially since a report Friday morning showed that consumer prices held steady last month.
If the Fed cuts as much as some expect, that would put its key federal funds rate at 2%, down from
5.25% when the Fed first began lowering rates six months ago.
Yet, it's not clear that the Fed cuts can do much to fix what ails the U.S. economy as it undergoes a
credit crunch.
Full article at: http://money.cnn.com/2008/03/14/news/economy/fed_outlook/index.htm?postversion=2008031512

Alejandro Valle Baeza
Participa en el

Posgrado Facultad de Economía

Av. Universidad 3000 Circuito interior

México 04510, DF México

Tel. 55-56222148 fax 55-56222158

Página web: http://usuarios.lycos.es/vallebaeza


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