The global economy is slowing, U.S. business investment has stalled, and the yield curve, which reflects market expectations of future interest rates, has inverted—a quirk that preceded previous recessions. How should monetary policy respond? The Federal Open Market Committee, of which I am a participant, will consider this question at our September meeting. Absent some surprise reversal in these economic developments, I will argue that we should not only cut the federal funds rate, but that we should also use forward guidance to provide even more of a boost to the economy than a rate cut alone can deliver. The ... (full story)