Magazine article American Banker

Mullins: Fed Isn't Being Too Restrictive

Magazine article American Banker

Mullins: Fed Isn't Being Too Restrictive

Article excerpt

Mullins: Fed Isn't Being Too Restrictive

PARIS -- Federal Reserve Vice Chairman David Mullins said in a published interview that U.S. monetary authorities have vigorously loosened credit conditions and are not being too restrictive.

"I think we've pushed the [credit] envelope pretty hard and far," Mr. Mullins told the French daily La Tribune de l'Expansion. "I don't think there is a clear case in any sense that we are too tight."

Mr. Mullins said that, while U.S. officials have no strict idea as to whether the U.S. dollar is at a satisfactory level, its current level does not disturb them. The U.S. economy is lifeless and vulnerable, he said, and if the situation changes, the Fed would take appropriate measures.

Target Range

U.S. money growth is climbing toward the middle of the Fed's target range, Mr. Mullins said.

The Fed vice chairman said it seemed difficult to cause longer-term rates to drop. That is so in part because long-term rates can rise if short-term rates are pushed down too far.

He said that, in the past, central banks had erred at this point in the business cycle by over-stimulating economic activity.

Mr. Mullins said the one-point Dec. 20 reduction in the Fed's discount rate, to 3.5%, had been well received. Share prices rose, long-term interest rates fell, and some banks cut their prime lending rates by a full point. The Fed could not have hoped for a better reaction, he was quoted as saying. …

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