In the goods market, if a cut in the interest rate were made while producers’ pricing expectations remained high, or were even increasing, it would further encourage mispricing behaviour in the face of a slowdown and would in fact exacerbate it.
As for interest rates on term instruments, short-term rates maturing before the year-end have been moving at a historically low level. Meanwhile, rates maturing beyond the year-end are relatively high due to market participants’ concern over the Year 2000 problem.