U.S. Fed Rate Cut

U.S. Federal Reserve Board(FRB) cut U.S. interest rate by 0.5 percentage points recently and expert reactions varied on the rate cut. Many financial experts agreed with the rate cut with some expecting further rate cuts down the road to defend the U.S. financial market from the impact of the subprime mortgage loan problem that might damage the U.S. financial market and subsequently the world financial market.
Alan Greenspan, former FRB chairman, said the rate cut was inevitable, arguing that the FRB has the responsibility to stabilize the economy, although FOMC knew that it did not want to save any financial institutions, but benefited from the rate cut nevertheless.
Professor Rogoff of Harvard University said the FRB acted due to the worsened economic indicators and therefore, there might one or two more rate cuts down the road to soften the economy from the impact of the subprime mortgage loan problems.
Other experts voiced further rate cuts by 1 percentage point to keep the Fed rate at 3.75 percent. The slump in the housing market will make FRB inevitable to lower the rate further to ensure the U.S. economy to achieve from 2.5 percent to 3 percent annual growth this year. nw

Former Chairman of Federal Reserve Board Alan Greenspan.