Federal Reserve’s Kohn wants ‘nimble’ policy

Source: Exec Digital USA

Date :11/28/2007 9:38:14 AM

Federal Reserve Vice Chairman Donald Kohn today cited the need for a more flexible monetary policy, raising hopes of an interest rate cut.

In a speech to the Council on Foreign Relations, Mr. Kohn said that should the elevated turbulence in the market over the past few weeks persist, ‘it would increase the possibility of further tightening in financial conditions for households and businesses.''

Reservations

“Uncertainties about the economic outlook are unusually high right now,” he continued.

“In my view, these uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

Some analysts think that this "nimble" policy would allow the U.S. central bank to cut rates when it next meets on December 11, even though an October meeting was inconclusive on the issue.

Mr. Kohn went on to say that if banks are worried that a liquidity shortage is pushing up rates, ‘central banks [such as the Federal Reserve] should be able to address the problem.’

November 28, 2007