Earlier this month, America’s Duke University asked the chief financial officers of 887 large companies how they might respond to falling interest rates. The results were noteworthy for economists, political pundits and investors alike.
Some 91 per cent of groups said a 1 per cent fall in interest rates would have no impact on their business plans, while 84 per cent professed indifference towards even a 2 per cent fall. “CFOs believe that a monetary action would not be particularly effective,” the survey concluded; or not, that is, in terms of boosting investment and jobs.
This is sobering stuff. When Ben Bernanke, Fed chairman, unveiled his “QE3” measures last week – a promise to buy more mortgage-backed securities as part of quantitative easing – he justified this by pointing to the continued high levels of unemployment and weak growth. By providing an open-ended commitment to buy securities, the Fed hopes to bolster demand and thus create more jobs.