More rate rises needed for slowdown

The Federal Reserve is raising US interest rates to levels unseen since 1991, when the economy was coming out of recession. Are the halcyon days of low inflation, moderate growth, and high productivity coming to an end? On balance we think not, but it is becoming a riskier call. The US economy continued to power ahead in the second quarter, but the effect of 175 basis points of interest rate tightening since last June should materially cool the US economy in the second half of 2000. Monetary policy is a slow working tool, especially when used against a backdrop of such prolonged irratio...