How bad is the economy going to get, and what does that mean for monetary policy? Those are two hot questions among economists right now. In his Feb. 14 testimony before the Senate Committee on Banking, Housing and Urban Affairs, Federal Reserve Chairman Ben Bernanke stated that “the outlook for the economy has worsened in recent months, and the downside risks to growth have increased.”
Observers deciphered this and other remarks as affirming current expectations for more interest rate cuts. But there remains a lot of uncertainty about how far and fast the Fed cuts rates.