Would the Fed Be to Blame For Recession?; Central Bank Officials Know They Are Vulnerable
The message from the Bush administration last week to the Federal Reserve could not have been more clear: Give the U.S. economy some insurance against recession by lowering interest rates immediately.</br></br>And a warning was attached: If a recession occurs, it will be your fault and we will make sure you get the blame.</br></br>Richard Darman, director of the Office of Management and Budget, delivered both the message and the warning on a television talk show, and White House spokesman Marlin Fitzwater later confirmed that Darman was speaking for President Bush.</br></br>The Fed, as usual, made no public response, but top policymakers at the nation's central bank know they will be vulnerable to such charges if a recession occurs, as a substantial number of private forecasters now predict.</br></br>For one thing, through its day-to-day operations to add cash to or drain it from the banking system, the Fed this year is more closely controlling key short-term interest rates than it has at any time since 1979. It deliberately began raising those rates in March 1988 to slow economic growth and head off a surge of inflation.