Move to cut long-term rates expected

December 09, 1991|By New York Times

NEW YORK -- Many analysts expect the Federal Reserve Board to follow its move last Friday easing monetary policy with additional moves in a few weeks to bring down the prime rate, now at 7.5 percent.

It would put more downward pressure on long-term interest rates, including home mortgages.

But after 30 months of watching the Fed push down short-term rates, investors and economists are becoming more convinced that lower rates alone cannot quickly put the economy on track.

True, the Fed's rate reductions are probably preventing a more severe economic downturn. But its control over long-term rates -- and the influence of interest rates in general on economic activity -- is limited, so monetary policy alone cannot quickly restore consumer spending and confidence.

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