What do people expect. There is no free lunch, nor quick fixes available.
Fed Drops Key Rate for Third Time This Year; a Disappointed Wall Street TumblesWASHINGTON (AP) — The Federal Reserve dropped its most important interest rate to a nearly two-year low on Tuesday and left the door open to additional cuts to prevent a housing and credit meltdown from pushing the economy into a recession.
Fed Chairman Ben Bernanke and all but one of his colleagues agreed to trim the federal funds rate by one-quarter percentage point to 4.25 percent.
The rate reduction, the third this year, was needed to energize national economic growth, Fed officials said. The deepening housing slump is affecting the behavior of consumers and businesses alike, the Fed said.
“Economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks,” the Fed said in a statement explaining its decision to cut rates again. The three rate cuts ordered thus far “should help promote moderate growth over time,” the Fed added.
On Wall Street, stocks tumbled, reflecting disappointment among some investors who were hoping for a larger rate cut. The Dow Jones industrial plunged more than 200 points.
The funds rate affects many other interest rates charged to individuals and businesses and is the Fed’s most potent tool for influencing economic activity.
Here comes everyone’s favorite friend … INFLATION! Wasn’t cheap credit as a result of low interest rates the primary cause of the real estate (inflation) bubble?