LUCERNE-IN-MAINE – The latest interest rate cut by the Federal Reserve Board may stimulate the economy, just like the other 12 cuts in the last 21/2 years supposedly did.

Or it may not, depending on which economist – a pessimist or an optimist – you talk to.

Alan Blinder, who served as vice chairman of the Federal Reserve Board from 1994 to 1996, calls himself an optimist. He said he believes that this rate reduction will fire up the economy, and when it does, investors and consumers should expect interest rates to go up rapidly.

Blinder, who spoke to customers of Merrill Merchants Bank and Union Trust on Wednesday morning at the Lucerne Inn, said he believes the Federal Reserve Board’s decision to cut rates on short-term loans by a quarter-percent was a struggle.

As an optimist, Blinder said he believes the war in Iraq is over, oil prices are cheaper than they were before the war, and now businesses, certain that they won’t be paying higher energy costs, are willing to invest in themselves.

“We’re not in that environment right now, but we will be fairly quickly,” Blinder said. “I think in the next two, three or four weeks, the Fed will know more about the post-Iraq war economy.”

He acknowledged, however, that even though the war ended in late April, all the economic data relating to the country’s post-Iraq war economy has not been compiled and analyzed yet.

Blinder was in Maine to promote a new, FDIC-insured investment product for deposits larger than $100,000. The program, named Certificate of Deposit Account Registry, was developed by Blinder, now a professor at Princeton University, and other top national economists who formed a company called Promontory Interfinancial Network. Information on CDAR is available at Merrill Merchants and Union Trust, he said.

After his talk, Blinder agreed that discussions these days on whether a new interest rate cut actually will jumpstart the economy are similar to the discussions that took place the other 12 times rates have been cut in the past two-and-a-half years.

But who is the Fed listening to – the economic optimists or the pessimists, who believe the war isn’t over and businesses don’t want to grow and add jobs?

“That’s something the Fed is struggling with,” Blinder said. “It’s one of those tough calls.”

Blinder said he believes the other 12 interest rate cuts have energized the economy. The cuts, however, weren’t enough to silence vocal pessimists and this may be the Fed’s last chance before it is forced to “deploy unconventional weapons” such as purchasing short-term Treasury bills. Now the short-term interest rate is 1 percent.

“There’s not enough bullets in the gun to do the job,” he said, if pessimists continue to weaken even more an already struggling economy.