One question uppermost in the minds of political and business leaders the world over probably is whether the slowing U.S. economy will pick up in the second half of this year. The Federal Reserve Board on Wednesday provided its answer by cutting key interest rates for the fourth time since January. The Fed has demonstrated its determination to halt the slide, sending a clear signal that it is looking for a second-half recovery.
It usually takes about half a year before a monetary-policy move shows its effect. In this sense, Fed Chairman Alan Greenspan has made a timely move, looking to domestic economic developments about six months ahead. The rate cuts are also expected to have salutary effects on Japan's faltering economy and other economies around the world, including those in Asia and Europe.
The U.S. economy has slowed sharply since last autumn, as evidenced by stock-price falls and the collapse of the "Internet bubble." The Fed has moved quickly and boldly. In just four months since January, it has slashed the federal funds rate — a sensitive barometer of short-term interests — and the official discount rate by as much as 2 percent each to 4.5 percent and 4 percent respectively.