The risks of gradualism

Article Abstract:

US interest rates are being raised gradually, and this could lead to the problem that rises have little impact in controlling demand. Interest rates take time to have an effect, but financial markets should anticipate economic slowdowns, and have not done so. There is concern about possible inflationary pressures from energy prices, a tight labor market and abundant money, and higher interest rates would be a useful precautionary measure. They can be lowered afterwards, but a delay could create problems.

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Summer dilemma for the Fed

Article Abstract:

Factors affecting US interest rate policy are examined in detail, and the Federal Reserve is advised to raise rates by 0.25%.

Economic aspects

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The real menace

Article Abstract:

The US Federal Reserve chairman, Alan Greenspan, has hinted that interest rates could be raised following signs of increased inflationary pressure. The US economy has performed well while Greenspan has been chairman, with continued economic growth, low unemployment and low inflation. There is concernthat this is changing, as the labor market tightens, and growth in domestic demand rose to 7% in 1st qtr 1999. There are signs that the economy is overheating, with asset price rises, an increase in private sector borrowing, and a record current account deficit, while stock prices have boomed. US interest rates were cut in 1998, and there is a case for reversing some of these cuts.

Cover Story, Inflation (Finance), Inflation (Economics)

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