Craig Alexander, Vice Pre
sident & Deputy Chief Economist, TD Bank Financial Group, comments, “This time, there are no rate cuts as we saw in 2001, so the liquidity expansion hasn’t been as broad based. The way liquidity is being injected is through repos, which means the central bank will buy them back in few days. So, the money will not remain in the system and will not fuel markets or it won’t be inflationary pressures.” But a possible cut in interest rates carries problems like markets again getting supplied with cheap money fuelling more bubbles and most excruciatingly fueling inflation. Asking for a rate cut at this point in time will bring some relief, but it will again lay the foundations for another crisis of this sort in the future, but with even more debilitating effects than what the world is experiencing now. John Hawksworth, Head of Macroeconomics, PricewaterhouseCoopers, UK, voices, “There does not appear to be an immediate need for a cut in the key Federal Funds rate, although this might be considered at the Fed’s next scheduled meeting on September 18, 2007. Any such decision to cut rates should, however, be based not just on financial market developments but on broader economic fundamentals of relevance to the outlook for growth and inflation in the US economy.” The prudence that has been displayed by the Fed and other central bankers might just go down the drain if they rope in a rate cut, which is anything but wise. At this juncture, a rate cut could well end up as our ‘fate’ cut! Period!
For Complete IIPM Article, Click on IIPM Article
sident & Deputy Chief Economist, TD Bank Financial Group, comments, “This time, there are no rate cuts as we saw in 2001, so the liquidity expansion hasn’t been as broad based. The way liquidity is being injected is through repos, which means the central bank will buy them back in few days. So, the money will not remain in the system and will not fuel markets or it won’t be inflationary pressures.” But a possible cut in interest rates carries problems like markets again getting supplied with cheap money fuelling more bubbles and most excruciatingly fueling inflation. Asking for a rate cut at this point in time will bring some relief, but it will again lay the foundations for another crisis of this sort in the future, but with even more debilitating effects than what the world is experiencing now. John Hawksworth, Head of Macroeconomics, PricewaterhouseCoopers, UK, voices, “There does not appear to be an immediate need for a cut in the key Federal Funds rate, although this might be considered at the Fed’s next scheduled meeting on September 18, 2007. Any such decision to cut rates should, however, be based not just on financial market developments but on broader economic fundamentals of relevance to the outlook for growth and inflation in the US economy.” The prudence that has been displayed by the Fed and other central bankers might just go down the drain if they rope in a rate cut, which is anything but wise. At this juncture, a rate cut could well end up as our ‘fate’ cut! Period!For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2007
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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