Thursday, December 13, 2007
We take a look at the broader economy in this timely interview and podcast with The Wharton School's Jeremy Siegel, on Tuesday's .25% discount rate cut. Professor Siegel questions if the Federal Reserve is possibly not being aggressive enough on lowering interest rates; plus commentary on Ben Bernanke's performance, Wall Street's reactions and the Presidential candidates.
Jeremy Siegel on the Interest Rate Cut: The Fed May Be 'Behind the Curve'
For the third time in the past few months, the Federal Reserve's Open Market Committee has chosen to cut short-term interest rates by a quarter percent or 25 basis points. The Fed cut its main short-term rate target to 4.25% and the "discount rate" charged on direct Fed loans to commercial banks to 4.75%. In its statement justifying the decision, the Fed noted, "Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today's action, combined with the policy actions taken earlier, should help promote moderate growth over time." Will the Fed's decision help promote "moderate growth?" Knowledge@Wharton asked Jeremy Siegel, a professor of finance at Wharton and author of The Future for Investors, to analyze the Fed's decision and its impact on the markets. An edited version of the transcript follows.