Fed's Yellen joins economy-too-slow chorus

Posted Dec 4th 2007 11:23AM by Joseph Lazzaro
Filed under: Housing, Federal Reserve

San Francisco Federal Reserve Bank President Janet Yellen is on the wires again, becoming the latest Fed governor to note that the U.S.'s economic slowdown is bigger than she expected, Bloomberg News reported Tuesday.

Last week Fed Chairman Ben Bernanke and Vice Chairman Donald Kohn also noted that credit market woes fed by subprime mortgage and related asset defaults tipped the scales toward 'the downside risks to growth.'

Yellen said recent data on retail sales and consumer spending were not that encouraging, Bloomberg News reported.

The Fed has twice lowered key interest rates this year and is expect to cut rates again when it meets December 11. The Fed Funds rate, the rate banks charge each other, now stands at 4.50%, and the discount rate, the rate the Fed charges banks for short-term loans, is at 5.00%.

Fed Analysis: Yellen's comments, combined with Fed Chair Bernanke's comments last week that the Fed needs to be "flexible," all but guarantees a Fed interest rate cut December 11. Further, even though the Fed will review reports on factory orders, mortgage delinquencies, consumer confidence, and November 2007 jobs created before next week's meeting, the debate now in Wall Street circles is whether the Fed will cut key interest rates by one-quarter percentage point or one-half percentage point. A one-quarter point cut holds an edge, but that may change if Friday's jobs reported comes in especially weak.

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