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Tuesday, July 15, 2003

Greenspan Sees No Bottom Limit to the Fed Funds Rate

Correcting a lot of the recent interpretation about how low Big Al was prepared to go, the man himself has now made it clear: there is no bottom limit above zero. Meantime the recent news is definitely on the optimistic side. Let's just all hope they're right.

Federal Reserve Chairman Alan Greenspan said on Tuesday there is no level of the federal funds rate below which the Fed would not cut interest rates further, even though there may be an impact on some financial institutions. "I don't see that there is a downside to what we can do conventionally," Greenspan told the House of Representatives Financial Services Committee in response to a question. "I don't envisage that will be necessary but to presume that there's a certain level that's often been stated, say 75 basis points, that that's as low as we can go -- I think that is mistaken. I think we have far more flexibility than is implied in that question," he said. The Federal Reserve cut interest rates to a 45-year low of 1.0 percent last month, and many in financial markets speculated it would be reluctant to cut rates much further.
Source: Forbes

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