Memo to the Fed: Pace Rate Hikes Carefully

When rate cuts end, BW chief economist Michael Mandel thinks, the Fed's inevitable hikes should be gradual, unlike the central bank's tightening spree

In June 2004, Alan Greenspan—remember him?—raised the fed funds rate target from 1% to 1.25%. As BusinessWeek wrote at the time, the then-Federal Reserve chief's aim was to "gently wean the economy and the financial markets off their dependence on cheap money." One big worry: The danger that "an overly rapid increase in rates could puncture the housing bubble, causing a sharp decline in housing prices."

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