Angell Says Fed Needs to Bring Down Long-Term Rates to Revive Economy
WASHINGTON -- The U.S. economy's current weakness may not respond to the Federal Reserve's conventional medicine of rapidly cutting the short-term interest rates it controls, Fed Gov. Wayne Angell said.</br></br>Mr. Angell's prescription for Fed policy: "Ease at a slower pace than the market anticipates. That way we get long-term rates to fall. Since April of 1989, that's been my game plan."</br></br>Because so many of the economy's ills reflect a real estate bust, the Fed instead needs to bring down long-term interest rates, Mr. Angell said in an interview. Those rates are set largely in financial markets -- and reflect expectations of inflation as well as the credibility of the Fed's anti-inflation commitment.</br></br>Mr. Angell insisted that he wasn't revealing how he voted at the last meeting of Fed policy makers or how he intended to vote when they meet in two weeks, but his analysis suggests a go-slow approach.</br></br>The Fed is under pressure to cut short-term rates further in response to what is now widely regarded as a recession. Fed Chairman Alan Greenspan is believed to have been given leeway to reduce rates before the Fed's policy committee convenes again in about two weeks. But internal objections could dissuade him from doing so.