Inside the Fed Tool Kit

by James Rickards
Daily Reckoning

The US economy is slowing perceptively. The Fed has created a mess. We’ve had a full year, 4 consecutive quarters, with average growth of about 1.2% and with some revisions that may even go lower. That’s awful.

First of all, that’s extremely close to recession. Second, it’s way below the Federal Reserve’s (Fed) projections of about 2.5%. Third, it’s way below potential of 3.5%. This is not just weak growth, it’s extraordinary weak, and dangerously close to recession.

What should the Fed be doing about that? One thing they might want to do is cut interest rates. They can only cut them 25 basis points without going negative.

Negative interest rates are another thing we’ve got to at least put into the mix. They could do one interest rate cut.

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