Federal Reserve Interest Rate Cut - Too Little, Too Late?

July 7, 2008 - 8:27 PM

(CNSNews.com) - The Federal Reserve Board cut interest rates a half point Tuesday, amid a poorly performing stock market. But some economists say it's too little, too late to help the economy.

"I generally think the Fed is behind the curve and probably still will be behind the curve after the cut," said Scott Grannis, chief economist for Western Asset Management Company, echoing the sentiment of many analysts. "While the Fed will be less tight after today than it has been, I think it will still be somewhat tight and still somewhat of a restraint on growth. I don't think it's going to have a significant positive effect on the economy," he said.

With Tuesday's cut, the Federal Reserve Board set the lending rate for its member banks at five percent. That will immediately translate into less expensive credit for consumers.

Nevertheless, Grannis believes steeper interest rate cuts are needed. "It's going to take some more cuts before this is over and the economy can get turned around," he said. "If I were running the Fed, I would be arguing for a cut to something like 4 percent. Just get it over with."

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