The economy is looking pre-recessionary

AS AN American of a certain age, I know quite a few people who’ve been warned by their doctors that they’re prediabetic. That is, their blood sugar is sufficiently elevated to put them at risk of Type 2 diabetes, even though they aren’t yet showing any symptoms. The good news is that they can greatly reduce that risk by losing weight, improving their diet and getting more exercise. But they need to take action quickly to avoid serious health problems.

No, this isn’t a medical advice column. But I found myself thinking about medical analogies when looking at recent economic data. The United States probably hasn’t entered a recession yet. But the economy is definitely looking pre-recessionary. And policymakers – right now basically meaning the Federal Reserve – need to move quickly to head off the risks of serious economic deterioration.

It’s clear that the Fed made a mistake by not cutting rates last week; indeed, it probably should have begun cutting months ago. Unfortunately, we can’t turn back the clock. But the Fed’s open market committee, which sets short-term interest rates, can and should make a substantial cut – probably half a percentage point, rather than its usual quarter-point – at its next meeting, scheduled for mid-September.