ND Expert: Fed’s rate cut risky for future | News | Notre Dame News | University of Notre Dame






	
	





  	Skip To Content
	Skip To Navigation
	Skip To Search






  
  
    University of Notre Dame

    
      
      Notre Dame News

      
      
    


    
    
      
        
        
        	
	Experts
	ND in the News
	Subscribe
	About Us
	


      
        
          
          
          
          
          
        

      


      
    


    
    
      	 Home
	 Contact
	 Search
	
          
          
            
            
          
          Menu
        
        


      
        
          
          
          
          
          
        

      

    

  

  
  

  

  
    	Home › 
	News › 
	ND Expert: Fed’s rate cut risky for future


    
      
        
          ND Expert: Fed’s rate cut risky for future

          
            
              
                
                Published: January 22, 2008
              

              
                Author: Erik Runyon
              

              







          

          
          
          

          
        
        
        
          

With the biggest one-day reduction of interest rates in history announced Tuesday, the Federal Reserves attempts to resuscitate the U.S. economy could be a mistake, according to University of Notre Dame economist Nelson Mark.

The rate cut doesnt speak directly to the problem at hand, which is a seizing up of bank credit.Instead, I would have thought that the Fed would try to bolster confidence by acting as a lender of last resort and providing liquidity to the payments system,said Mark, who specializes in international asset pricing and exchange rate economics.

The Federal Reserve dropped interest rates by three-quarters of a percentage point, to 3.5 percent.

The headline inflation rate for 2007 was around 4 percent,Mark said.Setting the real Fed funds rate at 3.5 percent has a good chance of accelerating inflation in 2008, which could turn out to be a huge problem for the Fed down the road.

Last years steadily rising inflation provided an environment in which companies could raise prices with relative ease.

If we have another round of cheap credit that adds to consumer demand, we run the risk that firms will raise prices by even more in the future,Mark said.

Media advisory: Marks comments may be used in whole or in part.He can be reached for further comment at 574-631-0518 or nmark@nd.edu .

TopicID: 26186

        

        
        
          
            

          

        
      
      
    
  
  
    	Home
	Experts
	ND in the News
	Subscribe
	About Us


  

  
  
    
     
  
  

  
  
    
      	For the Media
	Contact


    
            
    
      
	Office of Public Affairs and Communications


      Notre Dame News

      
        
          
            500 Grace Hall
 
            Notre Dame, IN 46556 USA
          
          
          
          
        

        
          	 Facebook
	 Twitter
	 Instagram
	 YouTube
	 Pinterest


        
      

      
© 2022 University of Notre Dame

    
    
      

        
      
      
        
          	Search
	Mobile App
	News
	Events
	Visit
	Accessibility


        
        
          	 Facebook
	 Twitter
	 Instagram
	 YouTube
	 LinkedIn