Thus, it seems to me that with last week’s easing in monetary policy, the pieces are in place to engender a gradual strengthening in economic activity in coming quarters. With the real federal funds rate now below zero, monetary policy is providing considerable support to the interest-sensitive sectors of the economy. Similarly, fiscal policy remains conducive to growth.
The uncertain mood among businesspeople--and more recently households--may continue to damp spending for a while longer. But with inventories now seemingly in better alignment with sales and with much of the restructuring associated with the high-tech overhang now behind us, some important sources of economic weakness over the past two years should begin to disappear.