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Show Interest Rates Boosted In a recent action, the Federal Reserve Board decided to tighten its money policy in order to slow down the rate of inflation. This decision will affect all of us because it will make borrowing that much harder. In defense of the Fed's decision, Paul Volcker, chairman of the Federal Reserve Board, said, "It's never very pleasant to tell someone that pain in the short ran is good for the long run. But the long run is not that far away." What the Fed did was raise the discount rate which is its own lending rate to banks which caused interest rates generally to rise. "Nobody at the Federal Reserve certainly not myself likes high interest rates," Volcker said. "We'd like to see them as low as they can be. The new policy offers the best promise of lower interest rates in the shortest period of time." On a further sad note, Volcker said that because of the acute state of inflation, a tax cut would be "inappropriate at this time," even one designed in large part to increase business investment. |