Will Cheaper Money Work?

Have interest rates lost their punch? It sure seems that way.

The Federal Reserve Board has cut the discount rate four times and pushed down the federal funds rate nine times over the past nine months. The Fed's latest move came on Sept. 13, when it cut the discount rate from 5.5% to 5%, the lowest level in 18 years. The rate on federal funds, or excess bank reserves, fell by a quarter of a percentage point, to 5.25%. Yet so far, many of the tangible signs of economic recovery have been downright anemic. Retail sales are falling, and auto sales in particular have slipped again after promising signs of a rebound.

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