Fallout: The Financial Crisis

Fed could cut interest rates again

John Dimsdale Oct 27, 2008
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Fallout: The Financial Crisis

Fed could cut interest rates again

John Dimsdale Oct 27, 2008
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TEXT OF INTERVIEW

Scott Jagow: The focus this week will be on the Federal Reserve. The Fed starts meeting tomorrow to decide whether it should cut interest rates again. Joining us now, our Washington bureau chief, John Dimsdale. John, where is the Fed leaning at this point?

John Dimsdale: The Fed’s worried. They’re hoping that lower interest rates will free up spending, prime the pump, encourage businesses to borrow, to invest in projects and buy equipment, create jobs. The experts are expecting another half-point drop in the rate that banks borrow from each other in the short term. That’s pretty low — the rate’s now 1.5 percent. The Fed is signaling that it could make even more cuts in the future. You know, they’re trying to show that they’re going to be very aggressive and attacking some bleak economic conditions.

Jagow: Well, is anyone raising a flag here and saying lowering interest rates is really not a good idea at this point?

Dimsdale: Yes. You know, this is down in territory where they rarely go. Some people say that they’re just pushing on a string — that they can’t get banks to lend to each other and this isn’t doing any good.

Jagow: Now, what about the rest of the economic picture this week? I know there are quite a few economic indicators coming out. What are we likely to see?

Dimsdale: Yes, we did an overall gauge of the economy on Thursday, when the Gross Domestic Product figure comes out, and that’s expected to show that the economy is actually contracting — that we are likely in a recession now and have been since the summer. Companies have been showing very weak sales, low to non-existent profits. Retailers are bracing themselves for a gloomy Christmas, as consumers won’t be in a spending mood, you know.

Jagow: Mmm, lots of holly, jolly stuff there, John. Haha.

Dimsdale: Haha, yeah.

Jagow: All right, John Dimsdale in Washington. Thanks.

Dimsdale: Thank you, Scott.

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