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Gramley: Zero Fed Funds Rate Possible

By    |   Wednesday, 29 Oct 2008 01:38 PM

Now that the Fed has cut to 1 percent, what next?

“Zero is a possibility,” former Fed Governor Lyle Gramley, now an adviser at Stanford Group Co.

“The predominant concern will be inadequate growth,” Gramley told Bloomberg News.

“If the economy shows additional signs of a deepening recession, I think the Fed will decide that the floor is not 1 percent.”

On Wednesday the Fed made a widely expected cut to 1 percent from 1.5 percent. A little over a year ago, the benchmark rate sat at 5.25 percent.

The next meeting is in December. Gramley sees the Fed going to a 0.5 percent then.

Former Bank of England rate-setting member Charles Goodhart told Channel 4 that the U.K. could cut its interest rate to zero as well.

The current Bank of England benchmark rate is 4.5 percent. It next meets Nov. 6, just after U.S. elections Nov. 4.

"They could go to zero. They went to zero in Japan in the 1990s when the Japanese had a recession or depression which went on for a long time and was quite severe,” said Goodhart, a founding member of the Bank of England's Monetary Policy Committee and now a professor at the London School of Economics.

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Now that the Fed has cut to 1 percent, what next?“Zero is a possibility,” former Fed Governor Lyle Gramley, now an adviser at Stanford Group Co.“The predominant concern will be inadequate growth,” Gramley told Bloomberg News. “If the economy shows additional signs of a...
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Wednesday, 29 Oct 2008 01:38 PM
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