Fed delivers another rate cut as Greenspan warns that the US may already be in recession

Source: Exec Digital USA

Date :1/31/2008 4:32:43 AM

The Fed cut the interest rate by a further 50 base points on Wednesday as it battles to keep the US economy from recession.

On the same day, former U.S. Federal Reserve Chairman, Alan Greenspan said the likelihood of an American recession remained 50 percent, commenting that there were ''few signs thus far that we are already in one.''

Recession risk

The rate cut is the second in eight days, reflecting the Fed’s embattled attempts to “boost flagging U.S. economy and stabilize jittery financial markets” and follows last week’s emergency 75 basis point cut.

The combined 125 basis point reduction represents the most abrupt easing of monetary policy by the US central bank since the early 1980.

In a statement, the Fed said its actions would “help promote moderate growth over time” and “mitigate the risks to economic activity”. But, it said, “downside risks to growth remain”. The US central bank said it would continue to assess the effects of financial and other developments and “act in a timely manner as needed to address those risks”.

Stimulus packages

Asked if the Fed, or any economic stimulus packages offered up the U.S. government, could help ward off any recession, Greenspan said likely not, ''Global forces can now override most anything that monetary and fiscal policy can do,'' he told German newspaper Die Zeit.

January 31, 2008