30 Nov 2007 Is the Fed Coming to the Rescue?

The economy is drifting very close to the edge now and what would have taken a gale force wind a few months ago might well be accomplished with little more than a wisp now. You might remember that in last weeks’ Brief we posed the question as to whether the Fed had lowered rates enough to sustain economic expansion. We noted that future reductions might be constrained because of growing threats of inflation as well as a dramatically sinking dollar. But without them, we noted the odds were greater that the economy would falter. The past several weeks’ revelations of worsening banking and credit problems, combined with a host of economic releases showing deterioration have changed the tone of the Fed dramatically.