Interest rates.(America's recent rate cut may be a mistake)(Brief Article)

Economist (US), The, November, 1998

A cut too far?

PERHAPS Alan Greenspan knows something that the rest of the world does not. The chairman of the Federal Reserve may have good reason to believe that America's economy is on the edge of a cliff. He may have inside knowledge of the risks of an imminent financial bust. But, apart from a cryptic reference to ``unusual strains'' in markets, he is not telling.

Given the benefit of the doubt, the Fed's cut in interest rates, of a quarter of a percentage point, on November 17th-the third such reduction in seven weeks-may be sensible insurance against trouble ahead, especially since inflation is low. But big doubts remain. America's economy is still growing briskly. Labour markets remain tight. Money-supply growth is bounding ahead. Moreover,...

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