This is the VOA Special English Economics Report.
United States Federal Reserve says it will use "all available tools"
to restart economic growth. The central bank's main interest rate is now the
lowest in its history. This week the Fed cut its target rate of one percent for
overnight loans between banks to a target range of zero to one-fourth of one
percent. The Fed based its decision on weakening economic conditions.
have decreased their spending every month since July -- the longest period in
at least sixteen years. Unemployment grew to six and seven-tenths percent in
November -- the highest in fifteen years.
This week's cut in the
federal funds rate was larger than many economists had expected. The Fed also
cut its rate for direct loans to banks. And it began paying interest on balances
held in the Federal Reserve System.
In the past, cutting rates has been a
powerful tool to lift the economy. But President-elect Barack Obama says it is
not enough this time.
BARACK OBAMA: "We're running out of traditional
ammunition that's used in a recession, which is to lower interest rates. They're
getting to be as low as they can go."
Some economists think the United States could face a "lost
decade" like Japan in the nineteen nineties. The Bank of Japan cut rates
to zero but failed to avoid a long recession.
Fed is also taking other steps. Last month, it announced a plan to buy up to
six hundred billion dollars in housing-related debt. Since then, rates for home
loans have fallen. The average rate for a thirty-year mortgage was five and
nineteen one-hundredths percent this week. That is the lowest in at least
next year, the Fed plans to lend up to two hundred billion dollars to support
credit markets for car and student loans and small businesses.
For now, the bank is following a
policy of easy money because there is little risk of inflation. For the last
two months there were record decreases in the Consumer Price Index, which goes
back to nineteen forty-seven.
Prices for goods and services were nearly unchanged in
November except for a big drop in energy prices. Gasoline prices fell almost
So far, the Organization of Petroleum
Exporting Countries has failed to halt the drop in oil prices. OPEC agreed
Wednesday in Algiers to a record production cut of more than two million
barrels a day, or about seven percent. Even so, oil traded below forty dollars
a barrel this week for the first time in four years.
And that's the VOA Special English Economics Report,
written by Mario Ritter. I'm Steve Ember.