The US is going to be fortunate to see positive growth in 2011 but even that may be optimistic. I can't say what the Fed is seeing out there that suggests the bad news will be gone by the end of 2009 but I don't see anything that hints of growth out there. As for cutting interest rates again (as the Japanese tried after their bubble) it would be enlightening to see when we've ever used interest rates to grow the economy.
It's a bit easier to think of the recent example - the Mr Bubble example - of cutting interest rates and seeing short term growth, followed by long term failure. Without the credit vehicles available today that we had a few years ago the end result may be different which is why the Japanese model may be closer to what we could expect. We should not confuse interest rate cuts with real economic policy for growth.
Federal Reserve officials slashed economic growth forecasts through 2009 and hinted that further interest rate cuts may be needed if growth slows further, minutes of their October policy meeting show.
"Even after today's (half-point cut), the committee judged that downside risks to growth would remain," the Fed, the U.S. central bank, said in minutes released Wednesday.
"Members anticipated that economic data over the upcoming intermeeting period would show significant weakness in economic activity, and some suggested that additional policy easing could well be appropriate at future meetings," the minutes of the Oct. 28-29 meeting said.
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