Fed Meets Today oil Rate Policy: Financial Analysts Expect Easing of...
Federal Reserve policy makers will meet today to decide whether the abrupt slowing in economic and money supply growth requires an active easing of monetary policy.</br></br>Money supply growth has been very weak and well below the FedÛªs short-term targets since July. Economic growth has slowed to the point that an increasing number of forecasters, while not predicting a recession, do not rule one out.</br></br>Federal Reserve officials are concerned about the slowdown in the expansion, particularly because there are no signs of any acceleration in inflation. In addition, Treasury Secretary Donald T. Regan and other Reagan administration officials recently began strongly urging the Fed to adopt an easier money policy.</br></br>Given those facts, many financial analysts predict that the policymaking group, the Federal Open Market Committee, will act to provide more reserves to the banking | system and encourage interest rates, which have dropped sharply in the last two months, at least to ; stay down or perhaps continue to , fall.</br></br>For instance, economist Henry Kaufman of Salomon Brothers predicted that the FOMC "will formulate a strategy that will validate the current interest rate structureÛ and move the federal funds rateÛÓthe interest that financial institution* charge when they lend reserves to each otherÛÓdown ÛÏinto the 9Û÷/åÈ percent to 9l/z percent area.Û The funds rate has been declining but generally has been closer to 10 percent than to 9'/2 percent.