Forbes urges the Fed to cut interest rate

Updated: 2007-09-09 19:09

SINGAPORE - Billionaire publisher Steve Forbes urged the US Federal Reserve on Sunday to cut a key interest rate by a full percentage point when it meets later this month, to solve an ongoing credit crisis.

The central bank should also focus on addressing the root of the problem - excess liquidity in the economy, Forbes said at lunch hosted by the Singapore Press Club.

Forbes said the Fed should cut the interest rate, now at 5.25 percent, by 100 basis points when it meets September 18 and make it clear "that while they're going to solve the short-term crisis, they will, over the next year or so, start to mop up the excess liquidity.

"Removing excess liquidity - the Federal Reserve selling bonds from its portfolio and withdrawing funds from the market - that is tightening which the Fed has not done," he said.

Economists increasingly believe the Fed will cut the rate by at least one-quarter percentage point at the September meeting.

The Fed has not lowered the rate in four years, but pressure has been building on it to do so to help ease credit conditions. Lower rates would reduce borrowing costs for everyone from potential homeowners to companies looking to finance activities and purchases.

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