THE ECONOMY O.K., O.K., We Give In!

Less than an hour after the government reported the January rise in unemployment last Friday, interest rates began to fall. First the Federal Reserve Board chopped the discount rate it charges to member banks by half a percentage point, to 6%. Voila! Major commercial banks took the cue immediately, slashing the prime lending rate half a point, to 9%. As a result, consumers can expect to pay a little less for car loans, mortgages and other bank credit, which could help boost the economy out of the recession.

Fed Chairman Alan Greenspan had taken considerable heat earlier in the week for the board's reluctance to ease credit. President Bush turned it up to broil during his State of the Union address last Tuesday with the demand "Interest rates must come down now." Departing Fed member Martha Seger criticized the board for failing to ease credit earlier, which she believes might have prevented the recession. Seger contended that the Fed is staffed by academics with little business experience and even less sense of the effects of their decisions. The Fed's decisive move last week should dampen the criticism, at least for now.