President warns against “overcorrecting” economy, but further Fed rate cut expected Tuesday
Posted by: in HousingFiled under: Politics, Housing, Federal Reserve, Recession
On Saturday, President Bush warned that the government must guard against going too far in trying to fix the troubled economy. “If we were to pursue some of the sweeping government solutions that we hear about in Washington, we would make a complicated problem even worse — and end up hurting far more homeowners than we help.”
“Democrats know that wait-and-see isn’t a responsible strategy for an economy that is teetering on the brink of recession,” said Senate Majority Leader Harry Reid. “The president continues to convince himself that inaction is the cure-all for the economic problems hurting hardworking Americans.” Democrats intend to strengthen the economy with measures dealing with housing, energy efficiency, and renewable energy.
President Bush said the recently passed program of tax rebates should start to lift the economy in the second quarter of the year and have an even stronger impact in the third quarter. But he urged caution about doing more, particularly about the crisis in the housing market.
In the meantime, the Federal Reserve is ready to deliver yet another big interest rate cut to aid an economy in crisis. Some economists anticipate a rate cut of one-half of a percentage point, while investors and others hope for even more.
Whatever happens Tuesday afternoon after central bank policymakers have met with Fed Chairman Ben Bernanke, a growing number of analysts feel that another rate reduction won’t pull the country back from the brink of the recession arising from the fallout from the housing and credit crises, not to mention skyrocketing energy prices and consumers reluctant to spend. Lower interest rates might help cushion the blows of a recession, they state, but even with the Fed’s aggressive moves, economic and financial conditions will continue to deteriorate.
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