Interest rates versus lending terms

[Greg Nowell <GN842@xxxxxxxxxxxxxxxxx>]

Thought I would post this since there was some
discussion a year or so ago about interest rates and
lending standards.  This was swiped from Yahoo business
post.  Similar comments have appeared in WSJ and
elsewhere.   We do tend to forget, higher and lower
rates being casual synonyms for tighter and easier
money,  that you can have a CB lowering rates while
banks tighten terms, leading to tighter overall money.
-gn


WASHINGTON (Reuters) - Sagging exports made East Coast
steelmakers cut production and Pacific
Northwest apple growers leave fruit rotting on the
trees in November, the Federal Reserve said
Wednesday in a report that showed the U.S. economy
under growing pressure.

While low interest rates fueled a building boom and
jobs were abundant, banks tightened their terms for
making loans and retailers said the Christmas shopping
season got off to a weaker-than-expected start.

The Fed's Beige Book report, named for the color of its
cover, will be used by policy setting members
of the U.S. central bank's Federal Open Market
Committee (FOMC) when they gather on Dec. 22 to
consider interest-rate strategy.

--
Gregory P. Nowell
Associate Professor
Department of Political Science, Milne 100
State University of New York
135 Western Ave.
Albany, New York 12222

Fax 518-442-5298