Fed
The Federal Reserve’s interest rate cuts are aimed at shielding the economy from tight credit, and policy-makers will watch credit conditions closely as they mull their next move, Minneapolis Fed Reserve Bank President Gary Stern said on Tuesday.
“If you have these headwinds, they are going to have implications for credit availability, and ultimately … economic performance,” he told reporters after speaking to the Financial Planning Association of Minnesota.
Looking ahead, the Fed will monitor the interplay between benchmark interest rates and credit conditions, said Stern, who in 2008 is a voting member of the U.S. central bank’s rate-setting Federal Open Market Committee.
“We have to try to understand as more information on both market conditions and the market becomes available .. no fax payday loan. how the two align, and what is the appropriate thing to do,” he said.
“We’ve already taken some significant action in my judgment,” he added.
The Fed has cut the benchmark federal funds rate to 3 percent from 5.25 percent since mid-September, including a two-step, 1.25 percentage point cut in January, to help the economy weather a sharp housing downturn and tighter credit.
Policy-makers will be sensitive to evolving financial conditions and to information on business activity to make decisions on how to proceed, Stern said.
The Fed’s rate cuts were warranted in the wake of the housing downturn and tighter credit.
Filed under: money by Fred