US Fed Governor Says Rates Could be Cut to Zero

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Last updated at: (Beijing Time) Thursday, July 24, 2003

US Fed Governor Says Rates Could be Cut to Zero

The US Federal Reserve (Fed) should be prepared to cut rates to zero if the US economy needs an extra jolt, Ben Bernanke, a Fed governor said on Wednesday.

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The US Federal Reserve (Fed) should be prepared to cut rates to zero if the US economy needs an extra jolt, Ben Bernanke, a Fed governor said on Wednesday.

"We should be willing to cut the funds rate to zero, should that prove necessary to provide the required support to the economy," Ben Bernanke said in remarks prepared for a speech at the University of California and released here Wednesday.

"Hence, monetary ease appears to be indicated for a considerable period," he said, adding that "keeping the funds ratetarget at or near its current level for an extended period may be sufficient."

Bernanke also said that the risk of weakening prices now outweighs the risk of inflation, and that as a result, the US Fed is more likely to cut than to raise interest rates.

The Federal Open Market Committee (FOMC), the Fed's policy-making body, cut the US federal funds rates late last month by a quarter of a percentage point to stave off deflation and spur economic growth. The short-term interest rate in the United Statesis now 1 percent, the lowest level since 1958.

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