There's still some more stimulus left. http://www.nytimes.com/2002/08/03/business/03DIP.html
NEWS ANALYSIS Most Bets Lie on a Decline in Fed Rates By FLOYD NORRIS With the economy looking less healthy than before, Wall Street is beginning to expect that the Federal Reserve Board will cut interest rates again within the next few months in an effort to stave off a double-dip recession.
"Fed officials are likely to ease" in the final quarter of this year, Edward McKelvey, senior economist for Goldman, Sachs, said yesterday. He said he expected the federal funds rate, the key rate that the Federal Reserve controls, to fall to 1 percent by the end of the year, down from 1.75 percent now.
That is more than most expect, but in the futures market yesterday — where speculators can place their bets on what will happen to that rate — the December futures forecast a decline to 1.5 percent by year-end. It is the first time that the market has forecast a quarter-point cut from the current level, already extremely low by historical standards.
By contrast, in late March, when the economy seemed to be growing well — and the Dow was 2,000 points higher than it is now — the futures market was forecasting substantially higher interest rates by year-end, an increase of at least 1.5 percentage points. [end clip]
Have we crossed the rubicon? Before, the "experts" were saying that a cut in rates would panic the markets. Howbout that prescience of the futures markets? It's reassuring that the Fed is boning up on the subject of deflation. From back in late June http://nuance.dhs.org/lbo-talk/0206/2269.html Doug posted: Tom Schlessinger points to this:
<http://www.federalreserve.gov/pubs/ifdp/2002/729/default.htm>
>International Finance Discussion Papers
>Preventing Deflation: Lessons from Japan's Experience in the 1990s
>Alan Ahearne; Joseph Gagnon; Jane Haltmaier; Steve Kamin
>2002-729 (June 2002)
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Peter