Which Way Will the Fed Jump?: Enigmatic Economy Watched for Clues
'J*HE FEDERAL Reserve Sys-j tem has been loosening its1 credit curbs and it will relax; them further unless a spring upturn in business activity, gets underway during the' davs ahead.</br></br>The central bank is moving carefully. It is trying to keep excessively tight money from cramping business activity but it doesnÛªt want to let credit be.come too easy if there is to be a vigorous business upturn.</br></br>The Federal Reserve is achieving its objective by judicious use of open markot operations. It will have to seriously consider a cut in the 4 per cent discount rate and even a reduction in bank reserve requirements if business activity does not strengthen soon.</br></br>The problem for the central bank is to make certain that sufficient money is available to keep the economy growing at a healthy pace. There is some fear that economic activity will slip on to a plateau even if a recession does not develop.</br></br>TPHE DISCOUNT rate is out of line with other shortterm rates but the Federal Reserve is reluctant to order a cut unless it can be reasonably certain that the reduction will stick. It doesnÛªt want to reduce the discount rate and then have to increase it again because it has found that rising business activity has sparked a fresh, rise in other shortterm rates.