An Iowa economist says even after eleven cuts in the prime rate, we’d better not expect magical results from the Federal Reserve. U-N-I professor Fred Abraham says the fed is trying to “turn the tide” of the current recession.As we know now, we’ve been in recession since last spring, and the rate-cuts are aimed to making money more plentiful and easier to get and spend, for business and consumers. Of course, the rate cuts have a downside, for savers who want high interest rates.People who have their money in CDs and short-terms savings accounts are seeing a lower return, but he still thinks the cuts will stimulate the economy. Professor Abraham says we get in the habit of expecting to see immediate results. The economy doesn’t work that way, he says – it’ll take a while, so the fed will probably wait now and see if they’ve done enough. We don’t even know, the lag could be half a year, or a year and-a-half. Professor Abraham says the Federal Reserve probably won’t reduce rates again for quite some time, waiting to see the effects of its cuts so far.
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