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The latest economic data indicate that the prospects for a sustained economic recovery have been further delayed. The low interest rate policy of the Fed remains the major factor behind this deterioration. Last Wednesday the Fed announced that it would keep the federal funds rate target unchanged at 1.25 %—at a 41-year low. Also, to encourage

Federal Reserve Chairman Alan Greenspan  said on Thursday , during questioning by the Senate’s special committee on aging, that he does not believe that a housing price bubble exists on a national level in the United States.  “The notion of a bubble bursting and the whole price level coming down seems to me as far as a national nationwide

A top panel of economists slashed their forecasts for US economic growth this year, saying the threat of war with Iraq was dampening consumer spending and business activity. The Blue Chip Economic Indicators panel of forecasters said it expected GDP to expand at a rate of 2.6% in 2003. The prediction made in January stood at 2.8%. The looming war

Economic policymakers around the world are running out of tools to boost the flagging global economy, said the World Bank in a report last week. The bank said the U.S. Federal Reserve, the world’s most influential central bank, has little room left to cut interest rates. In fact, the bank concluded that policies this year and next are more likely

Despite the aggressive lowering of the federal funds rate target from 6.5% in December, 2000 to the current level of 1.25%, U.S. economic activity remains subdued. Faced with a lackluster response to this aggressive monetary stance, it is tempting to draw parallels with the 1930’s economic depression. Most economists hold that such comparisons are

Last week, the Federal Reserve sent financial commentators and traders into a frenzy. It announced that, although it had left the federal funds rate target unchanged, it is ready to lower the rate aggressively if economic activity does not improve. Also, the central bank expressed concern that a strong downtrend in the growth momentum of price

Since January 2002 the U.S. dollar has fallen by 25.6% against the Euro and 13.2% against the yen. Most experts are of the view that the sharp fall in the dollar is the result of the fact that American imports of goods by far exceed exports of goods. In March the trade gap stood at $43.5 billion, not far from the record deficit of $44.9 billion in

In his testimony to the Joint Economic Committee on May 21 st , the Chairman of the Federal Reserve Board, Alan Greenspan, said that the Fed views deflation as a potential threat to the economy. For the time being, however, the Fed Chairman believes that the likelihood of deflation is not very high.  Moreover, if deflation were to strike,

On May 28 President Bush signed into law a $350 billion package of tax cuts and state aid. Millions of Americans will begin to see the effect of the package within weeks, in the form of bigger paychecks. Also, in July some 25 million families will receive up to $400 per child in tax credits. With more money in their pockets, the President believes

From its low on March 11, the Dow Jones Industrial Average has risen 20.5% (see chart), the S&P500 has increased by 23.4% (see chart) while the Nasdaq Composite has climbed 28% (see chart). Is this rebound indicative of the emergence of a new bull market? It is tempting to suggest that this may be the case. After all, stock price indices have been