Microeconomics
...rest rates to below zero. “The danger in waiting is that inflation might drift lower, ruining the ability to drive the real fed funds rate into negative territory as might be necessary,” said Laurence Meyer. Investors saw this as a signal that the Fed is prepared to cut interest rates once again. This will mark the 11th time this year the Feds have prepared to cut interest rates when they meet on December 11th. The fed rates have dropped 4.5 points ever since May 16, 2000 until November 6, 2001 from 6.50% to 2%. Future drops are expected to come after the next Fed meeting on December 11th, 2001. On Monday the National Bureau of Economic Research announced that the U.S. recession began in March. Fed chief Poole used the “r word”, recession for the first time and also predicted a turnaround to come shortly thereafter. Poole sees the only stopping place for cutting the interest rate is zero, “and if going to zero is constructive, then we ought to do it”. Poole also noted that this was not a prediction of future actions. Yet in another speech, Michael Moskow said the United States was experiencing a period “quite weak” economic activity and its recovery remained uncertain. Moskow did not label the U.S. economy as recessionary, Moskow also said “Yesterday’s announcement underscores t...