The most recent Monetary Policy Report delivered by the Federal Open Market Committee of the Federal Reserve to the United States Congress was the report of 18 July 2001. In this report, the Federal Reserve recognized that weakness in the national economy had become more persistent and widespread. The report took special note of what the Federal Reserve termed the continued severe shakeout in the high-technology sector (Board of Governors, Federal Reserve System, 2001b).
The report also identified a continued slump in demand for capital goods as a significant cause of the continued slowing of the national economy. The report cited concurrent slowing of foreign economies as another factor contributing to the decline in manufacturing in the United States in the first-half of 2001 (Board of Governors, Federal Reserve System, 2001b).
The Federal Reserve, through the Monetary Policy Report, contended, however, that a number of factors are in place that should set the stage for stronger growth, both in the last-half of 2001 and in 2002. The interest rate cuts implemented by the Federal Reserve itself rate special emphasis as a factor that would lead to renewed economic growth in the United States (Board of Governors, Federal Reserve System, 2001b).
Other factors mentioned in the Monetary Policy Report as causes for optimism for economic growth in the last-half of 2001 and in 2002 were the federal tax cuts and what the Federal Reserve referred to as the cresting of energy prices. Additionally, falling inventories set the stage, according to the report, for increases in future production (Board of Governors, Federal Reserve Board, 2001b).
Lastly, the Federal Reserve cited the continued rapid pace of technological innovation, together with projections for continued productivity growth over the longer run, as causes for optimism about the national economy in the United States. Somewhat ominously, the Federal Reserve, while stan...