The Federal Reserve cut interest rates by another quarter-point today, as the expected move brings interest rates to 2 percent for short-term lending. They also cut the discount rate by a quarter point to 2.25 percent.
Consensus is the Fed will now take a breather on rate cuts and hold off for awhile to see how the economy responds.
One key element will be how consumers spend their tax rebates; or if they spend them. If they do, it could give a boost to the economy which would give it some time to get back on track. The first wave of rebate checks have already started arriving.
According to the Commerce Department report Wednesday, the economy in the U.S. grew at a 0.6 percent rate for the first quarter, continuing to show resiliency in spite of the numerous pressures of the credit crunch, housing market and inflation in energy and food.
This flies in the face of many who are itching to use "inflation" in their vocabulary and writing. A number of those on Wall Street have been saying we're already in a recession, even though numbers continue to prove it's not. With expectations the economy will pick up later in 2008, we may even get by completely without a recession occurring.
Even so, the economy will take a little time to regain its momentum and grow at a higher rate.
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