Analysis Fed Wonders: Where's the Rebound? Policymakers Worried by Economy's Unusual Resistance to Rate Cuts
By John M. Berry Washington Post Staff Writer Thursday, June 21, 2001; Page A01
As U.S. economic growth remains stubbornly sluggish, some Federal Reserve officials are growing increasingly concerned that unusual developments may be clogging the main channels through which lower interest rates normally stimulate the economy.
After five half-percentage-point rate cuts this year -- the most aggressive such actions by the central bank in nearly 19 years -- there is no sign yet of a rebound.
Fed officials believe their policy actions will eventually be effective, but, because of a variety of factors, they can't be sure when. That makes it more difficult for them to decide whether, and by how much, to cut interest rates again when the central bank's top policymaking group, the Federal Open Market Committee (FOMC), meets next Tuesday and Wednesday.
There's always a long lag between changes in interest rates and noticeable changes in the economy's behavior. For that reason, the impact of the first of the interest rate cuts this year, which came Jan. 3, ought to be just beginning to be felt.
But some Fed officials are becoming increasingly concerned that any rebound in growth might not begin until next year and that it could start out weaker than many investors and analysts are expecting.
That's because they see few signs that the economy is responding to interest rate cuts in traditional ways.
[Rest at <http://www.washingtonpost.com/wp-dyn/articles/A20491-2001Jun19.html>.]