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  3. When the economy is sinking and inflation fading rapidly, is there any merit in cutting interest rates gradually? On December 4t

When the economy is sinking and inflation fading rapidly, is there any merit in cutting interest rates gradually? On December 4t

admin2013-06-02  60
问题      When the economy is sinking and inflation fading rapidly, is there any merit in cutting interest rates gradually? On December 4th the Bank of England again opted for boldness. It cut its benchmark (基准) rate by a percentage point, to 2% , following a stunning one-and-a-haft-point reduction a month earlier. On the same day Sweden’s central bank slashed its rate, from 3.75% to 2%, and said big cuts were needed because monetary policy was less effective than usual. But the European Central Bank (ECB) was stuck somewhere between caution and boldness. Less than an hour after the Bank of England’s decision, the ECB reduced its main rate by three-quarters of a percentage point, to 2.5%. That was the biggest cut in its ten-year history. It may look daring, but in the circumstances seems inadequate.
     One reason for the Bank of England’s haste is that the British economy, with its housing bust and exposure to financial services, is falling fast. Yet the euro area is struggling almost as badly. A closely watched index of activity, based on surveys of purchasing managers in manufacturing and services, slumped in November to its lowest level ever. That suggests euro-area GDP is shrinking fast, and for a third successive quarter. Business and consumer confidence is at a 15-year low, according to a survey by the European Commission.
     The ECB’s remit is to stabilize inflation, not the economy. But inflation is no longer a barrier to big rate cuts and the bank needs to act to ensure it does not fall too low.
     With news this grim, why not cut interest rates by more? In a speech last month, Lorenzo Bini Smaghi, of the ECB’s rate-setting council, argued against a hyperactive monetary policy(过激的货币政策). A big rate cut, he said, is more likely to drain confidence than perk it up, if "it is interpreted as a signal that the central bank has a more pessimistic assessment of the economy than market participants". A central bank that acts aggressively to insure against deflation could intensify expectations of it, malting that outcome more, not less, likely. Policymakers who slash rates at the first sign of danger will quickly run out of "ammunition(弹 品 )" ,he said.
     Yet the immediate outlook for the economy is so bleak that there seems little merit in holding fire. In America the Federal Reserve has hardly any room left for bold cuts: its target rate is at 1% but the actual rate is lower. Even so, the Fed’s policy of pushing vast sums of cash into the economy has shown that monetary-policy options are not exhausted even when interest rates approach zero. Jean Claude Trichet, the ECB’s president, had held his usual press conference, hut the bank seemed likely to cut rates again at its next rate-setting meeting on January 15th.  
What can we learn according to the whole passage?
选项 A、The survey by European Commission suggests Euro-area’s GDP is shrinking.
B、The quick slash may put policymakers into an impotent position later,
C、Interest rates reduced to zero, the monetary-policy will be powerless.
D、ECB now has no sign of cutting its rates.
答案B
解析 推理判断题。第四段最后一句提到Policymakers who slash rates at the first sign of danger will quickly run out of "ammunition"，可见大幅降息可能导致政策制定者无计可施，B 符合题意。
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