The Federal Reserve has cut a key short term interest rate by a quarter of a percentage point. This is the first action taken since the beginning of December. With a recent sharp drop in the nation’s supply of money, this could be signaling that the U.S economy will stall again. After a similar change in the money supply occurred last summer during the economics initial rebound form the recession, economic growth vanished in the second half of the year. Because of the year’s experience, officials don’t want to take any chances; it seems like

too big of a risk to ignore. Federal Reserve officials say they aren’t sure what caused the decline in the M2, or what it says about the economy’s future.

Financial analysts say the quarter point drop in federal funds is an unsure plan, because it will be enough to cause major banks to lower the 6.5% prime lending rate. Also, Economists watch the M2 movement closely because it signals the economic shift. The M2 includes currency in circulation, checking and saving deposits, certificates of deposit less than $100,000, and most money market mutual fund shares. The rates banks charge each other for overnight loans and anchoring most other short interest rates came as major retailing chains reported different results, after strong gains. By doing this the Fed hopes to encourage more money growth in different ways. The first step is t

Some topics in this essay:
Federal Reserve, Newspaper Editors, President Bush, federal reserve, financial analysts, money supply, president bush, lower rates,