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Will Federal Reserve efforts to ease the credit crunch work?(FEDERAL RESERVE)(Brief article)

Kiplinger Letter, The, December, 2007

Will Federal Reserve efforts to ease the credit crunch work?

Not alone. More rate cuts and cash infusions will be needed. And we expect both, including at least one more rate cut by summer.

The Fed's main goal is to reverse the negative psychology that is weighing on markets and making banks unwilling to lend.

Easier said than done. The big problem is fear of the unknown. No one has a grip yet on how much bad debt is still out there. Lenders want to wait and see, plus they need to build more reserves to handle problems. In short, restoring confidence will take time.

The Fed is fighting a war on two fronts, with limited results.

It's having some effect on economic growth. Signs are good, if not great. Witness stronger than...

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