Fed Cut To Help Sustain US Economic Growth: Lazear

Source : The Straits Times, September 19, 2007

WASHINGTON - THE US Federal Reserve's decision on Tuesday to slash interest rates by a half-percentage point will help the economy continue to grow and create new jobs, White House economic adviser Edward Lazear said on Tuesday.

'I think what happened today in terms of interest-rate cuts and so forth will be productive in terms of sustaining job growth and making sure the economy is able to continue to grow,' Mr Lazear said in an interview on CNBC.

Mr Lazear said he did not believe the US economy faced a possible contraction, even though it is at a 'mature stage' of the business cycle.

'It's not a question of whether it's going to go negative, it's a question of how positive can the growth be. We want to make sure that wages continue to grow and that jobs are available,' he said.

The Fed acted on Tuesday after a decline in US employment in August, the first drop in four years, appeared to confirm that housing-related strains were weighing on businesses and households.

In addition, reports on retail sales and industrial output in August also showed some softness.

Mr Lazear, asked whether the Fed move reduced the risk of recession, cast his answer in more positive terms.

'I'm saying that the odds of continued expansion are higher today as a result of a variety of policies,' he said.

'I think we'll see a good economy in the coming year and we could see growth rates pick up to around 2 to 3 per cent in the following year,' he said.

'We would be happy with that, given the fact that the housing market experienced a pretty significant decline over the past year,' he said. -- REUTERS