Friday, January 4, 2008

Fed fears 'vicious cycle'-their words, not mine

Fed fears worsening credit market
Published on : Fri, 04 Jan 2008 21:43
By : Agencies

WASHINGTON (AP) - Federal Reserve policymakers at their December meeting worried about the potential for a vicious cycle to develop in which credit problems could worsen. That could hurt economic growth and force the Fed to act more aggressively in cutting rates, according to meeting minutes made public Wednesday.'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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