Fed acted to help Main, not Wall, Street
The two latest interest rate cuts were meant to reduce U.S. economic risk, not lessen investors' risk of losing money, Federal Reserve governor said Monday.
Frederick Mishkin, in a speech during a risk management conference in New York, said the Fed has a responsibility to "take monetary policy actions to minimize the damage that financial instability can do to the economy."
Policies the Federal Reserve undertakes to to achieve this goal "are designed to help Main Street and not to bail out Wall Street," he said.
The action taken with the interest rate cuts of .5 and .25 percent, he said, "should help forestall some of the adverse effects" on the broader economy by recent negative events in the financial markets and "should help promote moderate growth over time."
Mishkin said it was possible the Fed went to far and that the lower rates could fuel inflation. If so, policymakers need to be flexible to react quickly.
"They need to be willing to expeditiously remove at least part of that ease before inflationary pressures become a threat," he said. // Copyright 2007 by United Press International
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