Fed Acts To Lower Key Rates: Slow Growth Prompts Central Bank's Move
The Federal Reserve pumped additional cash into the nation's banking system yesterday to lower key short-term interest rates and offset a growing reluctance of banks to make loans.</br></br>On Thursday, Fed Chairman Alan Greenspan told the Senate Banking Committee that the central bank was considering such a step because the banks were pulling back and in effect creating a tightening in credit markets."</br></br>With the outlook for growth already sluggish, Greenspan said such a tightening "could have undesirable effects on the economy.Û Lower interest rates could encourage more lending to creditworthy borrowers, even if many of those now being shut out by bankers still were unable to get loans.</br></br>Meanwhile, the government issued reports on retail sales and producer prices for June that analysts said were consistent with continued slow growth rather than an economic rebound or recession.</br></br>The Commerce Department said retail sales rebounded by 0.5 percent last month after three straight monthly declines that totaled about 2 percent. The Labor Department reported that producer prices for finished goods rose 0.2 percent last month as both food and energy prices went down.