Fed Fears Worsening Credit Market
"Some members noted the risk of an unfavorable feedback loop in which credit market conditions restrained economic growth further, leading to additional tightening of credit," the minutes said. "Such an adverse development could require substantial further easing" of rates, the minutes revealed.
Problems in the housing, credit and financial markets drove the Fed to do an about-face on Dec. 11 and slice its key interest rate yet again in the hope it would bolster an economy that was losing speed.
Fed Chairman Ben Bernanke and all but one of his colleagues agreed to trim the Fed key rate by one-quarter percentage point to 4.25 percent, a two-year low. The central bank ordered its key rate lowered three times last year; the December reduction was most recent one.
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